A share of common stock has an expected long-run constant growth rate of 10 percent and is currently priced at $66 per share.If investors require 15% rate of return,what was the last dividend paid on the stock?

Question

Quizplus · Accepted Answer

Step 1 - Use the Gordon Model to calculate the next dividend payment. 11ea7fdb_fbf5_b288_a768_d53486d9d9c8_TB2902_11 = 11ea7fdb_fbf5_d999_a768_55e116c533bf_TB2902_11 66 = 11ea7fdb_fbf5_d99a_a768_4d2468d33167_TB2902_11 11ea7fdb_fbf5_d99b_a768_236edab71704_TB2902_11 = $3.30
Step 2 - Discount the next dividend payment to find the dividend just paid. 11ea7fdb_fbf5_d99c_a768_d77fb7f436d8_TB2902_11 = 11ea7fdb_fbf5_d99d_a768_f31c4e161c5f_TB2902_11 = $3.00

A Share of Common Stock Has an Expected Long-Run Constant