Math Problem Statement

The market price of a stock is $38.37 and it is expected to pay a $4.00 dividend next year. The dividend is expected to grow at 3.17% forever. What is the required rate of return for the stock?just give answer

Solution

The required rate of return for the stock is 13.61%.

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Math Problem Analysis

Mathematical Concepts

Finance
Dividend Discount Model
Rate of Return Calculation

Formulas

Required Rate of Return = (Dividend / Price) + Growth Rate

Theorems

Dividend Discount Model (Gordon Growth Model)

Suitable Grade Level

Undergraduate Finance or Business Studies

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