7. value 1.00 points You\'ve collected the following information from your favor

Question

7. value 1.00 points You've collected the following information from your favorite financial website 52 -Week Price Div PE Close Net Hi Lo Stock (Div) Yid % Ratio Price Chg 77.40 10.43 Palm Coal .36 2.6 6 13.90 -0.24 55.81 33.42 Lake Lead Grp 1.54 3.8 10 40.43 -0.01 130.93 69.50 SIR 2.00 2.2 10 88.97 3.07 50.24 13.95 DR Dime .80 5.2 6 15.43 -0.26 36.50 20.89 Candy Galore 0.47 1.5 28 ?? 0.18 Requirement 1: Using the dividend yield, calculate the closing price for Candy Galore on this day. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Stock price Requirement 2: Assume the actual closing price for Candy Galore was $31.02. Your research projects a 4.00 percent dividend growth rate for Candy Galore. What is the required return for the stock using the dividend discount model and the actual stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Required return

Explanation / Answer

1. Candy's dividend yield = 1.5% or 0.015. Dividend amount = 0.47. Thus price = .47/0.015 = 31.33

2. Price = 31.02 g = 4% thus 31.02 = .47/(rate of return - growth rate)

31.02 = 0.47/(rate of return - 0.04)

solving we get rate of return as 5.51%

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