10.00 value: 5.00 points Suppose you know that a company\'s stock currently sell

Question

10.00 value: 5.00 points Suppose you know that a company's stock currently sells for $65.10 per share and the required return on the stock is 12 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Dividend per share S

Explanation / Answer

Dividend yield = capital yield = 0.12 / 2 = 0.06

D1 = 65.10 * 0.06 = 3.906

D0 = D1 / 1 + g

D0 = 3.906 / 1 + 0.06

D0 = $3.6849 or 3.68

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