Question

The common stock of Zeta Group sells for $42 per share, has a rate of return of 12.2 percent, and a dividend growth rate of 1.8 percent annually. What was the amount of the last annual dividend paid

Answer 1

Answer:

The amount of the last annual dividend paid is $4.3.

Explanation:

Given:

The common stock of Zeta Group sells for $42 per share, has a rate of return of 12.2 percent, and a dividend growth rate of 1.8 percent annually.

Now, to find the amount of last annual dividend paid.

Let the amount of last annual dividend paid be $l.$

Price of per share ($p$) = $\ 42.$

Rate of return ($r$) = $12.2\%.$

Rate of dividend growth ($g$) = $1.8\%.$

Now, to get the amount of last dividend paid we put formula:

$p=\frac{l(1+g)}{r-g}$

$42=\frac{l(1+1.8\%)}{12.2\%-1.8\%}$

$42=\frac{l(1+0.018)}{0.122-0.018}$

$42=\frac{l\times 1.018}{0.104}$

Multiplying both sides by 0.104 we get:

$4.368=1.018l$

Dividing both sides by 1.018 we get:

$4.3=l$

$l=\ 4.3.$

Therefore, the amount of the last annual dividend paid is $4.3.