Calculate the expected rate of return for a stock selling for $50 that just recently paid...

Calculate the expected rate of return for a stock selling for $50 that just recently paid a $6 dividend and is expected to increase the dividend each year at a growth rate of 3%. Use at least 3 decimals in your answer.

Solutions

Expert Solution

Expected dividend = $6*1.03 =6.18

Expected rate of return = (Expected Dividend / Stock Price ) + Growth rate

= (6.18 / 50) + 0.03

= 0.1236+0.03

=15.36 %

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

If Stock A has has an expected rate of return of 10%, and selling for $25...

If Stock A has has an expected rate of return of 10%, and selling for $25 with an expected growth rate of 7%, and Stock B has an expected rate of return of 12%, and market price of $40 with an expected growth rate of 9% ,do you think these stocks should have the same dividend yield or the same expected return?

A stock just paid a dividend of $1.23 how is it required rate of return of...

A stock just paid a dividend of $1.23 how is it required rate of return of 10.7% and a constant dividend growth rate of 2.8% what return Will you earn if you buy the stock today and sell it after the next dividend assume the returns and growth rate remains The Holding Period return is: a 5.3% b 8.5% c 11.7% D 10.6%

A stock just paid a dividend of D0 = $8.50. The required rate of return is rs...

A stock just paid a dividend of D0 = $8.50. The required rate of return is rs = 12.3%, and the constant growth rateis g =6.0%. What is the stock’s intrinsic value?

universal laser inc just paid a dividend of $3.35 on its stock, growth rate is expected...

universal laser inc just paid a dividend of $3.35 on its stock, growth rate is expected to be constant 4% indefinitely. Investors require a return of 16% for first 3 yrs , 14%for next 3 yrs and 12% thereafter.What is the current share price of the stock.

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected...

If a certain corporation just recently paid a dividend of $3.70, and the dividend is expected to grow at 4% for a long time into the future, calculate the price of this company’s stock at required returns of 8%, 10% and 12%. Then using a 10% required return, calculate the price at growth rates of 2%, 5% and 8%. Discuss what you see in the behavior of the prices in response to changes in the growth rate and changes in...

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20%

Stock ABC recently paid a dividend of $1.15 per share. The dividend growth rate is expected to be 4.20% indefinitely. Stockholders require a rate of return of 11% on this stock. If the stock trades at a price of $16.7, what will your holding period return be if you buy it now and sell it after 2 years for the intrinsic value according to the constant growth dividend discount model?

a. A stock just paid a dividend of $1.04. The dividend is expected to grow at...

a. A stock just paid a dividend of $1.04. The dividend is expected to grow at 26.98% for three years and then grow at 4.97% thereafter. The required return on the stock is 11.63%. What is the value of the stock? b. A stock just paid a dividend of $1.17. The dividend is expected to grow at 22.53% for five years and then grow at 4.80% thereafter. The required return on the stock is 14.27%. What is the value of...

A stock just paid a dividend of $2.40. The dividend is expected to grow at a...

A stock just paid a dividend of $2.40. The dividend is expected to grow at a rate of 5% forever. If the stock is currently selling for $25.00, what return do investors require to hold this stock? 18%, 17%, 16%, 15% A project is projected to cost $2,000,000 to undertake. It will generate positive cash inflows as follows: Year 1 - $400,000; Year 2 – 500,000; Year 3 - $650,000; Year 4 – 700,000; Year 5 – 800,000. What is...

Calculate the expected rate of return for Stock J. Round your answer to two decimal places....

Calculate the expected rate of return for Stock J. Round your answer to two decimal places. % Calculate the standard deviation for the market. Round your answer to two decimal places. % Calculate the standard deviation for Stock J. Round your answer to two decimal places. % Probability rM rJ 0.3 16% 22% 0.4 10 3 0.3 17 13 Probability rM rJ 0.3 16% 22% 0.4 10 3 0.3 17 13

A stock just paid a dividend of $2. The stock is expected to increase its dividend...

A stock just paid a dividend of $2. The stock is expected to increase its dividend payment by 50% per year for the next 3 years. After that, dividends will grow at a rate of 5% forever. If the required rate of return is 7%, what is the price of the stock today?

Subjects