Question

Mannix Corporation stock currently sells for $29 per share. The market requires a return of 11.2 percent on the firm’s stock. If the company maintains a constant 3.6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Answer 1

$2.125

Step-by-step explanation:

First, we calculate the expected dividend for year-1:

`current\ share\ price=(Expected\ dividend)/(Required\ rate-Growth\ rate)`

`29=(Expected\ dividend)/((11.2-3.6)percent)`

`29=(Expected\ dividend)/(7.6\ percent)`

Expected dividend = $29 × 7.6%

= $2.204

Current dividend share paid on the stock:

= Expected dividend - (Expected dividend × Growth rate)

= $2.204 - ($2.204 × 3.6%)

= $2.125