7. Global’s stock is selling for $15.47 this morning. Analysts believe the stock will sell for...

7. Global’s stock is selling for $15.47 this morning. Analysts believe the stock will sell for $17.84 in one year. The stock is expected to pay an annual dividend of $0.50 per share. What return will you earn if you purchase now?

Expert Solution

P0 = (Div + P1) / (1 + r)

$15.47 = ($0.50 + $17.84) / (1 + r)

1 + r = ($0.50 + $17.84) / $15.47

1 + r = 1.1855

r = 1.1855 - 1

r = 0.1855 or 18.55%

jeff jeffy answered 2 years ago

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