Suppose you know a company's stock currently sells for $85 per share and the required return on the stock is 10 percent.You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield.What is the current dividend if it's the company's policy to always maintain a constant growth rate in its dividends?
A)$3.18
B)$4.05
C)$4.37
D)$4.50
E)$4.64

Question

Quizplus · Accepted Answer

Dividend yield = 0.10/2 = 0.05D₁ = 0.05 × $85 = $4.25D₀ = $4.25/1.05 = $4.05

Suppose You Know a Company's Stock Currently Sells for $85