Answer: 7.35%
Explanation:
Based on the information given, the market rate of return on this stock will be calculated as:
= (D1/P0) +G
where,
D1= Dividend at year 1 = 2.20
P = price at present =43.19
G = dividend growth rate =2.25%
We then slot the figures into the formula and we will get:
= (D1/P0) +G
= (2.20 / 43.19) + 2.25%
= 0.051 + 2.25%
= 5.1% + 2.25%
= 7.35%
Therefore, the market rate of return will be 7.35%.
In 2012,70%of rich people were self made in the USA.That is the updated answer in 2012.
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Answer:
$10.28
Explanation:
<u>Step 1. Firstly we use the of the The dividend discount model (DDM)</u>
This calculation is: D1 = D0 x (1 + g)
D1 = $0.72 x (1 + 2.8%) = $0.74.
Where
Do = Dividend now
D1 = Dividend in year 1
g = growth
<u>Step 2 Next, using the Gordon Growth Model, </u>
Price per share is found to be D(1) / (r - g)
Price = $0.74 / ( 10% - 2.8%) = $10.28
where:
Do = Dividend now
D1 = Dividend in year 1
g = growth
r = required return