Select the items that describe how business investments can cause economic growth.
1 answer:
You might be interested in
Answer:
9.09%
Explanation:
Use Gordon growth model of stock valuation to find the required rate of return;
Price = D1/ (r-g)
this can also be written as
whereby,
Price = $35.41
D0 = Current dividend = 1.38
D1 = Next year's dividend = 1.38(1.05) = 1.449
g = growth rate = 5% or 0.05 as a decimal
r = required return = ?
Rewrite the formula <em>"Price = D1/ (r-g) " </em>to find <em>r;</em>
r =
r =
as a percentage, the required return = 9.09%