Problem Set 4 NAME 1 Zeniba Incs stock is currently selling

Problem Set 4 NAME: 1) Zeniba Inc.\'s stock is currently selling for $23.56 per share. The company just paid a dividend - $2.00 per share (i.e., Do - $2.00), and investors expect the dividend to grow at a constant rate out into the future. Investors require a minimum annual return on their investments in Zeniba stock-15%, what is the growth rate of dividends per share expected by investors?

Solution

23.56 = 2*(1 + growth rate)/(0.15 - growth rate)

growth rate in the dividends = 6.00%