Question

The next dividend payment by Savitz, Inc., will be $2.34 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If the stock currently sells for $37 per share, what is the required return?

Answer #1

Next Dividend(D1) = $2.34

Expected Growth rate of dividend(g) = 4.5% per year forever

Current Share price(P0) = $37

Calculating the required return:-

Ke = 10.82%

So, **the required return is 10.82%**

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