The common stock of Mid-Towne Movers is selling for $33 a share and has a 9 percent rate of return. The growth rate of the dividends is 1 percent annually. What is the amount of the next annual dividend?

Question

Quizplus · Accepted Answer

To find the next annual dividend, we need to use the formula: 
Next Annual Dividend = Current Dividend * (1 + Growth Rate) 
Here, the current dividend is not given, but we can use the information about the rate of return to calculate it. 
Rate of Return = Dividend Yield + Growth Rate 
9% = Dividend Yield + 1% 
Dividend Yield = 8% 
Now we can calculate the current dividend: 
Current Dividend = Current Stock Price * Dividend Yield 
Current Dividend = $33 * 0.08 = $2.64 
Finally, we can find the next annual dividend: 
Next Annual Dividend = $2.64 * (1 + 0.01) = $2.67 
Therefore, the best choice is (C) $2.64.

The Common Stock of Mid-Towne Movers Is Selling for $33