Mannix Corporation stock currently sells for $105 per share. The market requires a return of 14 percent on the firm's stock.

If the company maintains a constant 8 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

We can solve this problem using the **Dividend Discount Model (DDM)**, specifically the **Gordon Growth Model**. The formula for the price of a stock with constant dividend growth is:

\[
P_0 = \frac{D_1}{r - g}
\]

Where:
- $ P_0 $ is the current stock price.
- $ D_1 $ is the dividend to be paid next year.
- $ r $ is the required return (14% or 0.14).
- $ g $ is the dividend growth rate (8% or 0.08).

We are looking for $ D_0 $, the most recent dividend paid, but the formula gives $ D_1 $, the next dividend. We can relate the two using:

\[
D_1 = D_0(1 + g)
\]

### Step 1: Rearrange the formula to solve for $ D_1 $
\[
D_1 = P_0 \times (r - g)
\]
\[
D_1 = 105 \times (0.14 - 0.08)
\]
\[
D_1 = 105 \times 0.06 = 6.30
\]

### Step 2: Solve for $ D_0 $
Since $ D_1 = D_0(1 + g) $, we can solve for $ D_0 $:
\[
D_0 = \frac{D_1}{1 + g}
\]
\[
D_0 = \frac{6.30}{1 + 0.08} = \frac{6.30}{1.08} \approx 5.83
\]

Thus, the most recent dividend paid per share was approximately **$5.83**.

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Would you like more details or have any questions?

Here are 5 related questions you might explore next:
1. How does a change in the required return affect the stock price?
2. What happens to the stock price if the dividend growth rate increases?
3. How do companies decide on their dividend growth rate?
4. Can the Dividend Discount Model be used for non-dividend paying stocks?
5. What are other methods of valuing stocks?

**Tip:** The Gordon Growth Model assumes that dividends grow at a constant rate indefinitely, so it's best applied to mature companies with stable dividend growth.

Mannix Corporation stock currently sells for $105 per share. The market requires a return of 14 percent on the firm's stock. If the company maintains a constant 8 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Learn how to calculate the most recent dividend per share for Mannix Corporation, whose stock is currently priced at $105 with a required return of 14% and a constant 8% dividend growth rate. This example uses the Dividend Discount Model (DDM) to solve for the previous dividend payout.

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