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11 February, 17:58

A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share? A. $2.24B. $2.37C. $2.34D. $2.51E. $2.47

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  1. 11 February, 21:58
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    B. $2.37

    Explanation:

    The current dividend per share will be calculated using formula:

    Po = [Do (1 + g) ] / (r - g)

    Do = Po (r - g) / (1 + g)

    Po = Current Share price

    Do = Current dividend

    r = Rate of return

    g = growth of dividend

    Do = ($43.20 * (0.116 - 0.058) / 1.058

    Do = $2.37 per share
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