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.

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 2 years ago

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