Asked by Dharmesh Kharel on Jun 05, 2024
Verified
The Rich Company has a dividend growth rate of 14 percent, a current share price of $56.00, and a current dividend of $1.50. What is the required rate of return for Rich Company shares?
Dividend Growth Rate
The annualized percentage rate of growth of a company's dividends paid to shareholders, indicating the company’s financial health and profitability.
Required Rate of Return
The required rate of return is the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.
- Ascertain the worth of stock portfolios through diverse models and forecast the investment yield in given scenarios.
Verified Answer
IL
Ibrain LozoyaJun 09, 2024
Final Answer :
ke = D0(1 + g)/P0 + g
= 1.50(1 + 0.14)/56.00 + 0.14
=1.71(1.14) + 0.14
= 0.0305 + 0.14 = .1705 = 17.05 percent
= 1.50(1 + 0.14)/56.00 + 0.14
=1.71(1.14) + 0.14
= 0.0305 + 0.14 = .1705 = 17.05 percent
Learning Objectives
- Ascertain the worth of stock portfolios through diverse models and forecast the investment yield in given scenarios.