Question

nominal coupon interest rate? Problem 48 points) Goode Inc.'s stock has a required rate of return of 11.50%, and it sells for $25.00 per share. Goode's dividend is expected to grow at a constant rate of 7.00% What was the last dividend. DO? Problems (10 points)

P4

Answer 1

Required Return = 11.50%
Current Price = $25.00
Growth Rate = 7.00%

Current Price = Expected Dividend / (Required Return - Growth Rate)
$25.00 = Expected Dividend / (0.1150 - 0.0700)
$25.00 = Expected Dividend / 0.0450
Expected Dividend = $1.125

Expected Dividend = Current Dividend * (1 + Growth Rate)
$1.125 = Current Dividend * 1.07
Current Dividend = $1.05

So, last dividend (D0) is $1.05.