Question

Teder Corporation stock currently sells for $110 per share. The market requires a 13 percent return on the firm's stock. Required: If the company maintains a constant 7 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Answer 1

Answer:

Current Price (P0) = $110
Required Return = 13%
Growth Rate (g) = 7%

Required Return = Expected Dividend / Current Price + Growth Rate
0.13 = Expected Dividend / $110 + 0.07
0.06 = Expected Dividend / $110
Expected Dividend = $6.60

Expected Dividend = Current Dividend * (1 + g)
$6.60 = Current Dividend * (1 + 0.07)
Current Dividend = $6.17

Therefore, the most recent dividend per share paid on the stock is $6.17.