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ziro4ka [17]
3 years ago
7

What is the expected constant-growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4, and

has a required return of 18%?
Business
1 answer:
Viktor [21]3 years ago
6 0

Answer:

8.9

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid = d0 x (1 +g)  

r = cost of equity

g = growth rate

50 = [4 x (1 +g)] / (0.18 - g)

50(0.18 - g)  = 4(1 +g)

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