Pace Enterprises' common stock sells for $29, and its dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the expected dividend next year?

A) $1.33
B) $2.40
C) $1.45
D) $1.60

Question

Maddy Henderson · Accepted Answer

Final Answer : C, Explanation :  The expected dividend next year can be calculated as follows:Dividend next year = Dividend this year*(1+growth rate)Dividend this year = Current stock price*(required return - growth rate)Dividend this year = $29*(0.14 - 0.09) = $1.45Dividend next year = $1.45*(1+0.09) = $1.58 (rounded to the nearest cent)Therefore, the closest option is C) $1.45.

Pace Enterprises' common stock sells for $29, and its dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the expected dividend next year?

A) $1.33
B) $2.40
C) $1.45
D) $1.60

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Pace Enterprises' common stock sells for $29, and its dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the expected dividend next year?A) $1.33B) $2.40C) $1.45D) $1.60

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Learning Objectives

Learning Objectives

Related questions

Pace Enterprises' common stock sells for $29, and its dividends are expected to grow at a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the expected dividend next year?

A) $1.33
B) $2.40
C) $1.45
D) $1.60