Steady As She Goes, Inc., will pay a year-end dividend of $2.80 per share. Inves

Question

Steady As She Goes, Inc., will pay a year-end dividend of $2.80 per share. Investors expect the dividend to grow at a rate of 4% indefinitely.

If the stock currently sells for $28 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations.)

If the expected rate of return on the stock is 16.5%, what is the stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

If the stock currently sells for $28 per share, what is the expected rate of return on the stock? (Do not round intermediate calculations.)

Explanation / Answer

Answer:a P0= DIV1/(rg)

$28 = $2.80/(r 0.04)

r= 0.14 =14%

Answer:b P0= $2.80/(0.165 0.04) =$22.40

Answer:b

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