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Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 15 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

Respuesta :

Answer:

$ 3.87

Explanation:

It is given that :

Cost of the company's stock per share = $ 90

The required return on the stock is = 15 %

Therefore, the dividend yield = [tex]$\frac{9}{2}=4.5$[/tex]

We known that

[tex]$\frac{\text{dividend in one year}}{\text{current price}}=0.045$[/tex]

[tex]$D_1=0.045 \times 90$[/tex]

     = 4.05

The current dividend is,

[tex]$D_0= \frac{4.05}{1.045}$[/tex]

    = $ 3.87

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