question archive Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 9 percent
Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 9 percent
Subject:FinancePrice:2.87 Bought7
Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 9 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, the current dividend is $_______ per share.
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Answer:
Given Dividend Yield = 9/2 = 4.5
We know
(Dividend in One Year)/Current Price= .045
D1= .045*90
D1=4.05
D0 (Current Dividend) = 4.05/(1.045)= $3.87
