Question

Gontier corporation stock currently sells for $64.18 per share. the market requires a return of 12 percent on the firm's stock. required: if the company maintains a constant 5.75 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Answer 1

As per Dividend distribution model,

Re = D1/p0 + g

0.12 = D1/64.18 +0.0575

0.0625 = D1/64.18

D1 = 4.01125

D0 =4.01124/1.0575 = 3.793

Most recent dividend per share paid on the stock =$ 3.793