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Nana76 [90]
3 years ago
14

CDB stock is currently priced at $80. The company will pay a dividend of $4.57 next year and investors require a return of 10.8

percent on similar stocks. What is the dividend growth rate on this stock
Business
1 answer:
Stels [109]3 years ago
3 0

Answer:

The answer is 5.09%

Explanation:

The model used in this question is the Dividend Discount Model and it is one of the methods used in determining the price of stock. Here, the price of stock had already been determined. We are looking for one of the variables (growth rate) used in determining the price.

The formula for determining price of stock is:

Po = D1/r - g

Where Po is the price of stock

D1 is the dividend for next year

r is the rate of return

g is the dividend growth rate

$80 = $4.57/0.108 - g

Cross multiply:

8.64 - 80g = 4.57

80g = 8.64 - 4.57

80g = 4.07

g = 4.07/80

g =0.05088

g = 5.09%

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The answer is directors.

<h3>What entity elects the board of directors for a corporation?</h3>
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5 0
10 months ago
Which is the correct way to write $450.05 in words on a check?
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8 0
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