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The next dividend payment by Savitz, Inc., will be $1.76 per share. The dividends are anticipated...

The next dividend payment by Savitz, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. If the stock currently sells for $34 per share, what is the required return?

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Expert Solution

D1 = Next Devidend = $1.76

P0 = Share Price = $34

g = growth rate = 7%

Required return = (D1 / P0) + g

= ($1.76 / $34) + 7%

= 0.0517647059 + 0.07

= 0.121764706

= 12.1764706%

Therefore, Required return is 12.18%

jeff jeffy answered 2 years ago
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