Question

please solve this asap thank you Here is a share of stock: The current stock price...

please solve this asap thank you

Here is a share of stock:

The current stock price is $56.

The next dividend will be $2.8.

The dividends will have a growth rate of 4.2% forever.

What is the required return?

A.

8.6%
B.

9.2%
C.

7.8%
D.

8.2%
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Homework Answers

Answer #1

We know the stock price formula, that is:

Where,
P0 = Current stock price
D1 = Expected dividend next year
R = Required rate of return
g = dividend growth rate

Substituting the values, we get:

OR

Therefore, answer is B. 9.2%

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