Question

ems Saved Suppose you know that a company's stock currently sells for $67 per share and the required return on the stock is 10.8 percent. You also know that the total return on the stock is evenly divided between capital gains yield and 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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) Dividend per share

Answer 1

Current Price	67
Return Required	10.8
R = Return = 10.8 =	Dividend Yield + Capital Gain Yield
Dividend Yield =	0.108/2 =	0.054
Expected Return =	D0*(1+g) / (P0+g)
0.108 =	D0*(1+0.054)/(67+0.054)
D0*(1.054) =	(0.108-0.054)*67
D0*(1.054) =	3.618
D0=	3.618 / 1.054
D0=	3.432637571