Teder Corporation stock currently sells for $115 per share. The market requires a 15 percent return on the firm\'s stock. Required : If the company maintains a constant 7 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? A$9.20 B$8.25 C$25.37 D$8.60 E$10.94 Solution Cost of equity using didvidend discount model [( recent dividend ( 1 + growth rate) / share price] + growth rate 0.15 = [( recent dividend ( 1.07) / 115] + 0.07 0.08 = recent dividend ( 1.07) / 115 9.2 = recent dividend * 1.07 8.598 = recent dividend Therefore, recent dividend is $8.60.

1. Teder Corporation stock currently sells for $115 per share. The market requires a 15 percent
return on the firm's stock. Required : If the company maintains a constant 7 percent growth rate
in dividends, what was the most recent dividend per share paid on the stock?
A$9.20
B$8.25
C$25.37
D$8.60
E$10.94
Solution
Cost of equity using didvidend discount model [( recent dividend ( 1 + growth rate) / share price]
+ growth rate
0.15 = [( recent dividend ( 1.07) / 115] + 0.07
0.08 = recent dividend ( 1.07) / 115
9.2 = recent dividend * 1.07
8.598 = recent dividend
Therefore, recent dividend is $8.60