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:
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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:
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.
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