Question

Wildhorse, Inc., is expected to grow at a constant rate of 5.00 percent. If the company’s next dividend, which will be paid in a year, is $1.68 and its current stock price is $22.35, what is the required rate of return on this stock?

Answer 1

Answer:

the required rate of return on the stock is 12.52%

Explanation:

The computation of the required rate of return on the stock is shown below:

= (Next year Dividend ÷  current stock price ) + growth rate

=  ($1.68 ÷ $ 22.35 ) + 0.05

= 0.075 + 0.05

= 12.52%

Hence, the required rate of return on the stock is 12.52%

We simply applied the above formula so that the correct value could come

And, the same is to be considered