Question

Roy's Welding common stock sells for $52.35 a share and pays an annual dividend that increases by 4.7 percent annually. The market rate of return on this stock is 13.1 percent. What is the amount of next year's expected dividend? O A $4.40 OB.$4.98 OC. $2.91 OD.53.64

Answer 1

Expected dividend =Current price*(rate-growth)

Expected dividend =52.35*(13.1%-4.7%)

Expected dividend =4.40

Answer 2

ANSWER :

Given :

r = 13.1 % = 0.131

P₀ = 52.35 ($)

g = 4.7 % = 0.047

Now,

r = D₁ / P ₀ + g

=> 0.131= D₁ / 52.35 + 0.047

=> D₁ = (0.131 - 0.047)*52.35 = 4.3974 = 4.40 ($) approx.

So,

A. $4.40 is the ANSWER.