Question

Roy's Welding common stock sells for $64.20 a share and pays an annual dividend that increases by 4.30 percent annually. The market rate of return on this stock is 14.6 percent. What is the amount of this year's dividend paid last week

Answer 1

Answer:

$6.91

Explanation:

Roys welding common stock sells for $64.20

The annual dividend increase by 4.30%

The market rate of return is 14.6%

Therefore the amount of dividend paid last week can be calculated as follows

64.20 = last week stock × (1-0.043)÷(0.146-0.043)

64.20 = last week stock × 0.957÷ 0.103

64.20 × 0.103 = last week stock × 0.957

= 6.6126 = last week stock × 0.957

Last week stock = 6.6126/0.957

= $6.91