Solution:-
Dividend per share | $ 3.17 1% |
Explanation:-
We know the stock has a required return of 10 percent, and the dividend and capital gains yield are equal, so:
Dividend yield = 1/2(.10)
Dividend yield = .050 = Capital gains yield
Now we know both the dividend yield and capital gains yield. The dividend is simply the stock price times the dividend yield, so:
D1= .050($66.40)
D1= $3.32
This is the dividend next year. The question asks for the dividend this year. Using the relationship between the dividend this year and the dividend next year:
D1= D0(1 + g)
We can solve for the dividend that was just paid:
$3.32 = D0(1 + .050)
D0= $3.32 / 1.050
D0= $3.17
Please Rate or comment if you have any doubt regarding this solution.
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