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Weisbro and Sons common stock sells for $25 a share and pays an annual dividend that increases by 3.3 percent annually. The market rate of return on this stock is 11 percent. "What is the amount of the last dividend paid by Weisbro and Sons?"

a. $1.99
b. $1.86
c. $2.66
d. $0.80
e. $1.83

Respuesta :

tutorAnne

Answer:Therefore   last dividend paid by Weisbro and Sons is $1.86--- B

Explanation:

Using the  constant growth  dividend model,

P=D0x(1+g)/(r-g)

Where P =stock's current Price---$25

g=dividend growth rate per year=3.3%

D0= last dividend paid=?

 r=expected rate of return=11%

P=D0 x (1+g)/(r-g)

therefore

DO=P×(r-g)÷(1+g)

=>25 x (0.11-0.033)/(1+0.033)

=25 x0.077/ 1.033

=1.925/1.033

=$1.86

Therefore   last dividend paid by Weisbro and Sons is $1.86

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