Xytex Products just paid a dividend of $2.12 per share, and the stock currently
ID: 2771789 • Letter: X
Question
Xytex Products just paid a dividend of $2.12 per share, and the stock currently sells for $32. If the discount rate is 12 percent, what is the dividend growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Xytex Products just paid a dividend of $2.12 per share, and the stock currently sells for $32. If the discount rate is 12 percent, what is the dividend growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
D0= $ 2.12, P0=$32 Ke=12% g=?
P0= D0(1+g)/Ke-g
32=2.12(1+g)/.12-g
32*(.12-g)=2.12(1+g)
3.84-32g=2.12+2.12g
3.84-2.12=32g-2.12g
1.72=29.88g
g=0.0576
g=5.76%
Thus dividend growth rate is 5.76%
Whereas,
D0=Dividend currently paid
P0=Current Price
Ke=Discount Rate
g=Growth rate
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