Weisbro and Sons common stock sells for $30 a share and pays an annual dividend

Question

Weisbro and Sons common stock sells for $30 a share and pays an annual dividend that increases by 5.1 percent annually. The market rate of return on this stock is 9.10 percent. What is the amount of the last dividend paid by Weisbro and Sons?

$1.26

$1.14

$2.60

$1.46

$1.09

Weisbro and Sons common stock sells for $30 a share and pays an annual dividend that increases by 5.1 percent annually. The market rate of return on this stock is 9.10 percent. What is the amount of the last dividend paid by Weisbro and Sons?

Explanation / Answer

Rate of return=(Dividend for next period/Current price)+Growth rate

0.091=(Dividend for next period/30)+0.051

Hence Dividend for next period=(0.091-0.051)*30

=$1.2

Hnce last dividend paid=Dividend for next period*Present value of discounting factor(5.1%,time period)

=1.2/1.051

=$1.14(Approx)

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

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