The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.40 per share on i

Question

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.40 per share on its stock. The dividends are expected to grow at a constant rate of 7 percent per year indefinitely. If investors require an 14 percent return on The Jackson-Timberlake Wardrobe Co. stock, the current price is $ _____. The price will be $ _____ in 15 years. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))

Suppose you know a company's stock currently sells for $80 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield.
Required:
If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
$5.58
$11.16
$6.08
$5.30

Explanation / Answer

1.4(1+.07)/(.14-.07)=1.498/.07=$21.40

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