Question

Mannix Corporation stock currently sells for $51 per share. The market requires a return of 8.2 percent on the firm’s stock. If the company maintains a constant 2.1 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Dividend paid per share

Answer 1

Current Price = $51.00
Required Return = 8.20%
Growth Rate = 2.10%

Current Price = Expected Dividend in Year 1 / (Required Return - Growth Rate)
$51.00 = Expected Dividend in Year 1 / (0.0820 - 0.0210)
$51.00 = Expected Dividend in Year 1 / 0.061
Expected Dividend in Year 1 = $3.111

Expected Dividend in Year 1 = Recent Dividend * (1 + Growth Rate)
$3.111 = Recent Dividend * (1 + 0.0210)
$3.111 = Recent Dividend * 1.0210
Recent Dividend = $3.05

So, recent dividend per share is $3.05