A firm pays $4.90 dividend at end of year 1 (d1) stock price is $70 and constant growth rate of 6%. Computer the rate of return (Ke)

Am I correct in assuming:

Po= D1(1+G)/ (1+ Ke) change KE and PO

Ke= D1(1+G)/(1+Ke)

Ke= $4.90(1.06)/ 1+$70

Ke= 7.31%

Thanks

Your given info sets up this way...

70 \ = \ \frac{4.9}{Ke \ - \ 0.06}

Now I'll let you take the wheel, skipper. Remember that it's easy to plug any proposed answer you come up with back into the above growth-model equation, to make sure it checks out.