The next dividend payment by Halestorm, Inc., will be $1.52 per share. The divid

Question

The next dividend payment by Halestorm, Inc., will be $1.52 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $28 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The next dividend payment by Halestorm, Inc., will be $1.52 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $28 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Ke= G + D1 / P0

[Where Ke = required return, G= growth rate, D1 = Expected dividend, & P0 = Current market price of share ]

Ke = 0.06 + 1.52 / 28 = 0.1143 i.e., 11.43 % (approx)

Conclusion:- Required rate of return = 11.43 % (approx)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.