Secolo Corporation stock currently sells for $75 per share. The market requires

Question

Secolo Corporation stock currently sells for $75 per share. The market requires a return of 8.8 percent on the firm’s stock. If the company maintains a constant 2.4 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Secolo Corporation stock currently sells for $75 per share. The market requires a return of 8.8 percent on the firm’s stock. If the company maintains a constant 2.4 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Explanation / Answer

Stock price, P0 = D1÷(r-g)

D1 is next expected dividend

r is required return

g is growth rate

$75 = D0×(1+2.4%)÷(8.8%-2.4%)

Most recent dividend, D0 = $4.69

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.