Question

Mannix Corporation stock currently sells for $57 per share. The market requires a return of 11 percent on the firm’s stock. If the company maintains a constant 3.75 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Answer 1

Answer:

$3.98 per share

Explanation:

Calculation for what was the most recent dividend per share paid on the stock

First step is to find the price of stock

Using this formula

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

Let plug in the formula

$57 = D1/(11%-3.75%)

D1=$57×0.0725

D1 = 4.1325

Second step is to find the most recent dividend per share paid on the stock

Using this formula

Most recent dividend = Next Expected Dividend/(1+growth Rate)

Let plug in the formula

Most recent dividend= 4.1325/(1.0375)

Most recent dividend=$3.98 per share

Therefore the most recent dividend per share paid on the stock will be $3.98 per share