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View Full Version : Required rate of return


sandradawn
Apr 10, 2009, 08:42 AM
A share of common stock sells for $254, current dividends are $12/share and are expected to grow at 7%/annum. What is the required rate of return required by investors on this stock?:confused:

denzil87
Apr 26, 2009, 04:49 PM
Using the rearranged growth model we have 12(1+0.07)/(254-12) + 0.07 = 11.8%

Note: 254 - 12 is the ex div share price.