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If D1 = $3.8, g (which is constant) = 7.8%, and P0 = $64.4, what is...

If D1 = $3.8, g (which is constant) = 7.8%, and P0 = $64.4, what is the required rate of return on the stock? That is, solve for r.

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

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Answer #1

Required rate of return=D1/P0+g

                                     =$3.8/$64.4+7.8%

                                     =5.9%+7.8%=13.70%

                                                            =======

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