Flo’s Flowers pays an annual dividend that is expected to increase by 2.1 percent per year....
Flo’s Flowers pays an annual dividend that is expected to increase by 2.1 percent per year. The stock commands a market rate of return of 13.8 percent and sells for $19.06 a share. What is the expected amount of the next dividend?
Homework Answers
Growth rate, g = 2.1%
Current Price, P0 = $19.06
Market rate of return, r = 13.8%
Rate of Return = Next Year Dividend / Current Price + growth
rate
0.138 = D1 / $19.06 + 0.021
0.117 = D1 / $19.06
D1 = $2.23
So, a dividend of $2.23 will be paid next year
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