Morton Industries' common stock sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If Morton returns 13%, what was its most recent dividend?

A) $2.70
B) $2.50
C) $4.00
D) None of the above

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Eating Llama · Accepted Answer

Final Answer : B, Explanation :  To calculate the dividend, we use the Gordon Growth Model:Current Price = D / (r - g)where D is the dividend, r is the required return, and g is the dividend growth rate.Plugging in the given values we get,$54 = D / (0.13 - 0.08)D = $2.50 (rounded off to the nearest cent)Therefore, the most recent dividend is $2.50 (Option B).

Morton Industries' common stock sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If Morton returns 13%, what was its most recent dividend?

A) $2.70
B) $2.50
C) $4.00
D) None of the above

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Morton Industries' common stock sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If Morton returns 13%, what was its most recent dividend?A) $2.70B) $2.50C) $4.00D) None of the above

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Learning Objectives

Related questions

Morton Industries' common stock sells for $54. Dividends are expected to continue to grow at a rate of 8% annually. If Morton returns 13%, what was its most recent dividend?

A) $2.70
B) $2.50
C) $4.00
D) None of the above