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    sandradawn's Avatar
    sandradawn Posts: 1, Reputation: 1
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    #1

    Apr 10, 2009, 08:42 AM
    Required rate of return
    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's Avatar
    denzil87 Posts: 5, Reputation: 1
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    #2

    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.
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