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Artist 52 [7]
2 years ago
12

The next dividend payment by Skippy, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8

percent, forever. The stock currently sells for $43 per share. What is the required return
Business
1 answer:
Taya2010 [7]2 years ago
4 0

Answer:

The answer is 12.9 percent

Explanation:

This question will be solved using the Dividend Discount Model. It is one of the valuation methods used in valuing price of Equity/stock.

Po = D1/r - g

Po is the current worth of stocks

D1 is the next dividend paid

r is the rate of return

g is the growth rate

$43 = $2.12/ r - 0.08

43r - 3.44 = 2.12

43r = 5.56

r = 5.56/43

=0.129

Expressed as a percentage:

12.9 percent

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