Kellner Motor Co.'s stock has a required rate of return of 11.50%, and it sells for $25.00 per share. Kellner's dividend is expected to grow at a constant rate of 7.00%. What was the last dividend, D₀? A) $0.95 B) $1.05 C) $1.16 D) $1.27 E) $1.40

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$\begin{array}{lr}
\text { Stock price } & \$ 25.00 \
\text { Required return } & 11.50 \% \
\text { Growth rate } & 7.00 \% \
\mathrm{P}_{0}=\mathrm{D}_{1} /\left(\mathrm{r}_{\mathrm{S}}-\mathrm{g}\right), \text { so } \mathrm{D}_{1}=\mathrm{P}_{0}\left(\mathrm{r}_{\mathrm{S}}-\mathrm{g}\right)= & \$ 1.1250 \
\text { Last dividend }=\mathrm{D}_{0}=\mathrm{D}_{1} /(1+\mathrm{g}) & \$ 1.05
\end{array}$