Determine the required rate of return for Johnson and Johnson, assuming the geometric growth rate was 13.04% for the period 2
2 answers:
Answer:
The required rate of return for Johnson and Johnson is 16.85%
Explanation:
Johnson and Johnson paid an annual dividend of $2.110 last year, the geometric growth rate was 13.04 percent during last ten years.
To find out the expected dividend to be paid be Johnson and Johnson this year.
= [$2.110(1.1304)]
= $2.385
Required Rate of Return is calculated by the following formula,
R =
R = 2.385/62.55 + 0.1304
R = .1685, or 16.85%
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CPI = (current year price × base year quantity) / (base year price × Base year quantity)
CPI for bread in current year = [($1.50 × 2,000) / ($1 × 2,000)] x 100 = 150
CPI for laptops in current year = [($1,500 × 100) / ($2,000 × 100)] x 100 = 75
CPI for movies in current year = [($7 × 50) / ($5 × 50)] x 100 = 140
CPI for current year = (CPI for bread x weight of bread) + (CPI of laptops x weight of laptops) + (CPI of movies x weight of movies) = (150 x $2,250/$227,530) + (75 x$225,000/$227,530) + (140 x $280/$227,530) = 1.48 + 74.17 + 0.17 =75.82
