Worldwide Industries\' stock currently for $28 per share. The stock just paid a

Question

Worldwide Industries' stock currently for $28 per share. The stock just paid a dividend of $2.00 per share (i.e., D0 = $2.00). The dividend is expected to grow at a constant rate of 12% per year. (1) What stock price is expected 1 year from now? Round to the nearest cent, $XX.XX (2) What is the required rate of return on the company's stock? (round to 1 decimal place - XX.X% . Need to show your work in the area below the answer box. 2 part question.

1. Stock Price in 1 year

2. required rate of return

thanks!

Explanation / Answer

required rate of return=(2.24/28)+0.12=0.08+0.12=0.20=20%

Stock Price in 1 year=D2/(r-g)=2.51/(.20-.12)=2.51/0.08=31.375=31.38(approx)

D2=D0*[(1.12)^2]=2*1.12*1.12=2.51

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