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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

The most recent dividend paid $3.98

Step-by-step explanation:

The price of the stock is calculated using the following formula,

Let D0 be x

P0 = x * (1+g) / r - g

57 = x * (1+0.0375) / 0.11 - 0.0375

57 = 1.0375x / 0.0725

57 * 0.0725 = 1.0375x

4.1325 / 1.0375 = x

x = 3.98

The current dividend per share paid is $3.98

Answer 2

the most recent dividend per share paid on the stock is 3.98

Step-by-step explanation:

Given:

• $57 per share (D)
• Constant 3.75 percent growth (G)
• The market requires a return of 11 percent (R)

So we have the formula:

D =
`(D*(1+G))/(R - G)`

<=> 57 =
`(D*(1+ 0.375))/(0.11 - 0.375)`

<=> D = 3.98

So the most recent dividend per share paid on the stock is 3.98