Question

Magnus Inc.'s price is $35 a share, their dividend for last year was $1.90, and the long-term sustainable growth rate is 3.5%. The expected return on the stock is closest to:

Answer 1

Answer:

the expected return on the stock is 8.675%

Explanation:

The computation of the expected return on the stock is shown below:

The Expected return on the stock is

= Current year dividend ÷ Price of the stock + growth rate

= ($1.75 × 1.035) ÷ $35 + 3.5%

= 8.675%

Hence, the expected return on the stock is 8.675%

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

And, the same is to be considered