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A stock currently pays a $2 dividend. This dividend is expected to grow at 4.5% growth...

A stock currently pays a $2 dividend. This dividend is expected to grow at 4.5% growth for the foreseeable future. The current price is $28. What is the required rate of return on this stock?

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Answer #1

Value of Stock =

28 =

28 * Rate of Return - 0.045 * 28 = 2.09

28 * Rate of Return - 1.26 = 2.09

28 * Rate of Return = 2.09 + 1.26

Rate of Return = 3.35 / 28

Rate of Return = 11.96%

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