Winslow,Inc.,stock is currently selling for $59.48 a share.The stock has an expected growth rate of 4.22 percent and an expected total return for the next year of 9.87 percent.How much dividend income should you expect to receive next year if you purchase 800 shares of this stock today?
A)$2,309.20
B)$2,008.04
C)$2,688.50
D)$2,380.15
E)$2,001.10

Question

Quizplus · Accepted Answer

To determine the expected dividend income, we need to use the formula: Dividend per share = Dividend payout ratio x Earnings per share. However, since the problem doesn't provide us with the dividend payout ratio and earnings per share, we will use the expected total return to estimate the dividend yield (since dividend yield + expected capital gain = expected total return):

Dividend yield = (Expected total return - Expected capital gain) / Stock price
Dividend yield = (9.87% - 4.22%) / $59.48
Dividend yield = 0.0560 or 5.60%

Now, we can estimate the expected dividend income:
Expected dividend income = Dividend per share x Number of shares
Expected dividend income = (0.0560 x $59.48) x 800
Expected dividend income = $2,688.50

Therefore, the correct answer is C.