Question

The next dividend payment by Dizzle, Inc., will be $3.05 per share. The dividends are anticipated to maintain a growth rate of 4.00 percent, forever. If the stock currently sells for $49.70 per share, what is the required return price?

Answer 1

Answer:

Required return  =10.1%

Explanation:

required return price is given by following relation

$Required return=\frac{Dividend\ payable\ next\ year}{current\ stock\  price}+growth rate$

from the above information

dividend payable next year is = $3.05

current stock price = $49.70

growth rate = 4.00%

putting all value to get required return

$Required return= =\frac{3.05}{49.70}+0.04$

Required return = 0.101

Required return  =10.1%