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Vadim26 [7]
4 years ago
12

A firm just paid a dividend of $6 per share. Next year the dividend is expected to grow 8 percent, thereafter 10 percent forever

. The present share price is $36. Calculate the required rate of return on the firm's equity. Express the response in decimal format
Business
1 answer:
lawyer [7]4 years ago
3 0

Answer:

26%

Explanation:

MV=Do(1+g)/(Ke-g)

Where MV is market value=$36

Do is current dividend per share=$6

g is growth rate=8%

Ke=?  

By putting above values we get;

36=6(1+.08)/(Ke-.08)

36Ke-2.88=6+.48

36Ke=2.88+6+.48

Ke=9.36/36

Ke=26%

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Dane purchased a 15-year, 10% bond in 2014. At the time, the yield to maturity (YTM) on the bond was 8.8%. The bond currently se
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Rate of return < current YTM

Explanation:

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=rate(nper,pmt,-pv,fv)

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Solution

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