Factory Stores pays annual dividends and increases those dividends by 3 percent each year. The stock is currently valued at $11.80 a share and has a required return of 14 percent. You own 500 shares of this stock. What is the total amount of dividend income you should expect to receive next year?

Question

Quizplus · Accepted Answer

The correct answer is A. The total amount of dividend income you should expect to receive next year is $649.The dividend yield is 14% / 11.80 = 1.1864%. The dividend per share next year will be 1.1864% * 11.80 = $0.1403. The total amount of dividend income you should expect to receive next year is 0.1403 * 500 = $649.

Factory Stores Pays Annual Dividends and Increases Those Dividends by 3