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Roy's Welding common stock sells for $58.49 a share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?

Respuesta :

Answer:

$6.52

Explanation:

As we know that

Price of the stock = Next year dividend ÷ (Required rate of return - growth rate)

where,

Price of the stock is $58.49

Next year dividend = Last year dividend × 1 +  growth rate

Required rate of return = 12.6%

And, the growth rate is 1.3%

So, the last dividend paid is

$58.49 = (Last year dividend × 1 + 0.013) ÷ (12.6% - 1.3%)

After solving this the last year dividend is $6.52

We simply applied the above formula

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