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...



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.