The market price of a stock is $23.39 and it just paid a dividend of $1.82....

The market price of a stock is $23.39 and it just paid a dividend of $1.82. The required rate of return is 11.17%. What is the expected growth rate of the dividend? round to 2 decimal places please..in percent form.

Expert Solution

P0 = D0(1+ g) / (r - g)

23.39 = 1.82(1+ g) / (0.1117 - g)

23.39(0.1117 - g) = 1.82(1 + g)

2.612663 - 23.39g = 1.82 + 1.82g

2.612663 - 1.82 = 1.82g + 23.39g

0.792663 = 25.21g

g = 0.792663 / 25.21

g = 0.0314 or 3.14%

jeff jeffy answered 2 years ago

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