Pls Finance anybody!?

Question

Keys Inc's stock has a required rate of return of 10%, and it sells for $40 per share. Keys' dividend is expected to grow at a constant rate of 6% per year. What was Keys' last dividend, D0?

Answer 1

If you use the gordon growth model and plug in all of the variable except Do you get:

P =   {Do(1+G)}  / {R-g}

40= {Do(1+.06)} / {.10-.06}

Simplifiying:

40={Do(1.06)} / (.04)

Multiply both sides by .04 to get:

1.64=Do(1.06)

Divide both sides by 1.06 to get Do by its self

This gives you: Do= $1.547

Hope this helps!