The Martin Marotta Company increases their annual dividend by 4 percent each yea

Question

The Martin Marotta Company increases their annual dividend by 4 percent each year. The common stock has a market price of $42.05 a share on a required return of 11 percent. What is the amount of the dividend this company just paid?

The common stock of Connor, Inc. is selling for $16 a share and has a dividend yield of 3.5 percent. What is the next year dividend amount?

Winslow and Daughters just paid their annual dividend of $2.20 a share. They recently announced that all future dividends will be increased by 2 percent annually for ever. What is one share of this stock worth to you today if you require a 14 percent rate of return?

Winslow and Daughters just paid their annual dividend of $2.20 a share. They recently announced that all future dividends will be increased by 2 percent annually for ever. What is one share of this stock worth to you today if you require a 14 percent rate of return?

Explanation / Answer

To compute we need to apply the gordons formula also known as dividend discount model

hence Market price = Dividend/(Ke-G)

Ke = Required return

G = growth

Dividend= MArket price *(Ke-G)

= 42.05(.07)

=$2.94 per share is the dividend distributed by Martin Marotta

Connor inc

dividend yield = Annual dividend/Current stock

hence dividend = dividend yiled * current stock

= 16*.035

=$0.56 per share will be the dividend amount

Winslow and daughters

Po = Dividend /Ke- G

Po = 2.20(1+.02)/(.14-.02)

Po = 2.244/.12

=$18.7 price of the stock

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