Answer: $2.61
Explanation:
We can use the Gordon Growth Model here of which the formula is,
P = D1 / r – g.
Where
P is the stock price
D1 = the annual expected dividend of the next year.
r = rate of return.
g = the expected dividend growth rate (assumed to be constant)
Making D1 the subject of the formula to find the next dividend will help us solve for the recent Dividend.
D1 = P (r-g)
= 45.20 (0.099 - 0.039)
= $2.712
$2.712 is the next dividend.
To calculate the most recent Dividend we can use the growth rate in the following manner,
D1 = D0(1 + g)
D0 = D1/(1+g)
D0 = 2.712 / 1.039
D0 = $2.61
The dividend the company just paid is $2.61
Answer:
The dividend the company just paid is $2.61
Explanation:
Since the dividend is expected to grow indefinitely, we can proceed by employing the Gordon Growth Model formula as follows:
P = D1/(r – g) ……………………………………… (1)
Where;
P = current share price = $45.20
D1 = next year dividend = ?
r = required return = 9.9%, or 0.099
g = dividend constant growth forever = 3.9%, or 0.039
Substituting the values into equation and solve for D1, we have:
$45.20 = D1/(0.099 – 0.039)
D1 = 45.20 × (0.099 – 0.039) = $2.712
Since D1 = D0 × (1 + g), we can solve for D0 as follows:
$2.712 = D0 × (1 + 0.039)
D0 = 2.712 ÷ 1.039
D0 = $2.61
Therefore, the dividend the company just paid is $2.61.
