Eastern Electric currently pays a dividend of about $1.96 per share and sells for $37 a share. A. If investors believe the growt

Question

2 years ago

5

Eastern Electric currently pays a dividend of about $1.96 per share and sells for $37 a share. A. If investors believe the growt

h rate of dividends is 4% per year, what rate of return do they expect to earn on the stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Business

1 answer:

maksim [4K] · Answer 1 · 2022-11-27T22:52:10+03:00

maksim [4K]2 years ago

5 0

Answer:

Rate of return = 9.53 % (Approx)

Explanation:

Given:

Dividend per share = $1.97

Sales price = $37

Growth rate of dividends = 4% = 0.04

Find:

Rate of return

Computation:

Rate of return = D(1+g)/p + g

Rate of return = 1.97(1+0.04)/37 + 0.04

Rate of return = 9.53 % (Approx)