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2. A company will pay an annual dividend of $5.00 next year. Growth in dividends is...

2. A company will pay an annual dividend of $5.00 next year. Growth in dividends is expected to be constant at 2% indefinitely. The stock is currently priced at $75.00. What is the required return? Please show all work in Excel

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Answer #1
Dividend next year (D1) $              5.00
Constant dividend growth rate (g) 2.00%
The current price of the stock (P0) $           75.00
Required rate 8.67%

Excel formulas:

The formula for the required rate of return:

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