Zimmer's common stock sells for $37 and its dividend is expected to grow at a rate of 8 percent annually. What is the expected dividend (D₁) if Zimmer is returning 16%?

A) $2.74
B) $3.20
C) $5.92
D) $2.96

Question

GAGANDEEP PRATAP SINGH · Accepted Answer

Final Answer : D, Explanation :  To solve this problem, we can use the dividend growth model:P0 = D1 / (r - g)where P0 is the current stock price, D1 is the expected next dividend, r is the required rate of return, and g is the expected growth rate of the dividend.We know that P0 = $37, g = 8%, and r = 16%.Solving for D1, we get:$37 = D1 / (0.16 - 0.08)$37 = D1 / 0.08D1 = $2.96Therefore, the expected dividend is $2.96. The correct answer is D.

Zimmer's common stock sells for $37 and its dividend is expected to grow at a rate of 8 percent annually. What is the expected dividend (D₁) if Zimmer is returning 16%?

A) $2.74
B) $3.20
C) $5.92
D) $2.96

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Zimmer's common stock sells for $37 and its dividend is expected to grow at a rate of 8 percent annually. What is the expected dividend (D1) if Zimmer is returning 16%?A) $2.74B) $3.20C) $5.92D) $2.96

Definitions

Learning Objectives

Learning Objectives

Related questions

Zimmer's common stock sells for $37 and its dividend is expected to grow at a rate of 8 percent annually. What is the expected dividend (D₁) if Zimmer is returning 16%?

A) $2.74
B) $3.20
C) $5.92
D) $2.96