Question

Holtzman Clothiers's stock currently sells for $15.00 a share. It just paid a dividend of $1.50 a share (i.e., D₀ = $1.50). The dividend is expected to grow at a constant rate of 9% a year.

What stock price is expected 1 year from now? Round your answer to the nearest cent.
$  

What is the required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
  %

Answer 1

Div1 = $1.50 * (1 + 9%) = $1.635

r - 0.09 = 1.635/15 = 0.109

r = 19.9% ---> Required Rate of Return

Div2 = $1.635 * (1 + 9%) = $1.78215

--> Price next year