Concept explainers
A stock is selling for $11.90 a share given a market return of 14 percent and a
To determine: The amount of dividend per share paid lastly
Introduction:
Dividend is a sum of money paid to the shareholders of the company. It is distributed among the investors from the portion of a company’s earnings in the form of shares or cash.
Answer to Problem 8.1CTF
Explanation of Solution
Given information:
Currently, stocks were sold at a price of $11.90 per share. The market rate of return is 14% on this stock and the capital gains yield is 5%.
The formula to calculate the amount of last annual dividend paid using required rate of return formula:
Where,
Po refers to the present price of stock
Do refers to the recent dividend per share paid on the stock
Rrefers to the required return on the stock
g refers to the constant dividend’s growth rate
Compute the present annual dividend per share paid on the stock:
Hence, the amount of annual dividend per share paid lastly is $1.01.
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Chapter 8 Solutions
Fundamentals of Corporate Finance (Special Edition for Rutgers Business School)