Waterworks has a dividend yield of 6.25%. If its dividend is expected to grow at

Question

Waterworks has a dividend yield of 6.25%. If its dividend is expected to grow at a constant rate of 3.25%, what must be the expected rate of return on the company’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Waterworks has a dividend yield of 6.25%. If its dividend is expected to grow at a constant rate of 3.25%, what must be the expected rate of return on the company’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Explanation / Answer

dividend yield = dividend/price 6.25% = d/100 d= 6.25 Po = D(1+g)/(re-g) 100= 6.453125/(re-0.0325) Re= 9.703%

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