Teder Corporation stock currently sells for 115 per share Th

Teder Corporation stock currently sells for $115 per share. The market requires a 15 percent return on the firm\'s stock. Required : If the company maintains a constant 7 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

A$9.20

B$8.25

C$25.37

D$8.60

E$10.94

Solution

Cost of equity using didvidend discount model [( recent dividend ( 1 + growth rate) / share price] + growth rate

0.15 = [( recent dividend ( 1.07) / 115] + 0.07

0.08 =  recent dividend ( 1.07) / 115

9.2 = recent dividend * 1.07

8.598 = recent dividend

Therefore, recent dividend is $8.60