Suppose your know that a company\'s stock currently sells for $73.25 per share a
ID: 2778284 • Letter: S
Question
Suppose your know that a company's stock currently sells for $73.25 per share and the required return on the stock is 7.31 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a 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?
Omit the $ dollar sign and comma in your answer. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16).
Explanation / Answer
Answer:
Current dividend = Total return/2 = $5.354575/2 = 2.68 (ans) (because Current dividend = Capital Gain)
Total return = Current market price*required rate of return = $73.25*7.31% = $5.35
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