Question

Hirshfeld Corporation's stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1?

Answer 1

Answer:

expected year-end dividend is 2.44

Explanation:

given data

rate of return =  10.25% = 0.1025

sells price = $57.50 per share

constant rate =  6.00% per year = 0.06

to find out

What is the expected year-end dividend, D1

solution

we will apply here sells price formula that is express as

sells price = Dividend in 1 year ÷ ( cost of equity - growth rate )      ................1

put here value we get

57.5 = $\frac{D1}{0.1025 - 0.06}$

solve it we get

D1 = 2.44

so expected year-end dividend is 2.44