Question

Braxton's Cleaning Company stock is selling for $35.50 per share based on a required return of 11.2 percent. What is the the next annual dividend if the growth rate in dividends is expected to be 3.6 percent indefinitely?

Answer 1

Answer:

The next annual dividend is $2.70

Explanation:

The computation of the next annual dividend is shown below:

= Selling price of a stock × ( Expected rate of return - growth rate)

= $35.50 per share × (11.2% - 3.6%)

= $35.50 per share × 7.6%

= $2.70

Hence, the next annual dividend is $2.70

We simply applied the above formula

And, the same is to be considered