An issue of common stock is selling for $57.20. The year end dividend is expected to...

An issue of common stock is selling for $57.20. The year end dividend is expected to be $2.95 assuming a constant growth rate of 7%. What is the required rate of return? (Round your answer to 1 decimal place.)

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Expert Solution

Price of the company=dividend payable at the end of the year/(required rate of return-growth rate)

57.20= 2.95/(RR/100-.07)

.572 RR= 2.95+4.004

Required rate of return= 12.1573%

jeff jeffy answered 2 years ago

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