1 answer

An issue of common stock is selling for $58.30. The year end dividend is expected to...

Question:

An issue of common stock is selling for $58.30. The year end dividend is expected to be $3.15 assuming a constant growth rate of 10%. What is the required rate of return?

17.4

14.9

15.4

15.9


Answers

r = [D1 / P0] + g

= [$3.15 / $58.30] + 0.10

= 0.0540 + 0.10 = 0.1540, or 15.40%

So, 3rd option is correct.

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