A firm pays 4.90 dividend at the end of year one, and has stock price of $70 and a constant growth rate of 6%. What is the required rate of return?
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A firm pays 4.90 dividend at the end of year one, and has stock price of $70 and a constant growth rate of 6%. What is the required rate of return?
P = D0 / (r-g)
r = D0/P + g
r = (4.9 / 70) + .06
r = .13 or 13%
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