Question

Mannix Corporation stock currently sells for $31 per share. The market requires a return of 11.6 percent on the firm’s stock. If the company maintains a constant 3.8 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Price of stock = Next Expected Dividend/(Required Return - Growth Rate)

31 = D1/(11.6%-3.8%)

D1 = 2.418

Hence, most recent dividend = Next Expected Dividend/(1+growth Rate)

= 2.418/(1.038) = $2.32948

Hence. the answer is $2.33 per share