Question

Weisbro and Sons common stock sells for $25 a share and pays an annual dividend that increases by 3.3 percent annually. The market rate of return on this stock is 11 percent. "What is the amount of the last dividend paid by Weisbro and Sons?"

a. $1.99
b. $1.86
c. $2.66
d. $0.80
e. $1.83

Answer 1

Answer:Therefore last dividend paid by Weisbro and Sons is $1.86--- B

Step-by-step explanation:

Using the constant growth dividend model,

P=D0x(1+g)/(r-g)

Where P =stock's current Price---$25

g=dividend growth rate per year=3.3%

D0= last dividend paid=?

r=expected rate of return=11%

P=D0 x (1+g)/(r-g)

therefore

DO=P×(r-g)÷(1+g)

=>25 x (0.11-0.033)/(1+0.033)

=25 x0.077/ 1.033

=1.925/1.033

=$1.86

Therefore last dividend paid by Weisbro and Sons is $1.86