You’ve collected the following information from your favorite financial website.

52-Week Price	Stock (Dividend)	Dividend Yield %	PE Ratio	Close Price	Net Change
Hi	Lo
77.40	10.43	Acevedo .36	2.6	6	13.90	−.24
55.81	33.42	Georgette, Incorporated 1.54	3.8	10	40.43	−.01
130.93	69.50	YBM 2.00	2.2	10	88.97	3.07
50.42	14.13	Manta Energy .98	6.3	6	15.61	−.26
35.00	20.74	Winter Sports .32	1.5	28	??question mark	.18
According to your research, the growth rate in dividends for Manta Energy for the previous 10 years has been negative 13 percent. If investors feel this growth rate will continue, what is the required return for the stock?

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

To determine the required return for Manta Energy's stock, we can use the **Dividend Discount Model (DDM)**, specifically the **Gordon Growth Model**. The formula is:

\[
r = \frac{D_1}{P_0} + g
\]

where:
- $ r $ = required return
- $ D_1 $ = expected dividend next year
- $ P_0 $ = current stock price
- $ g $ = growth rate of dividends

### Step 1: Identify the values
- Current dividend ($ D_0 $) for Manta Energy: **\$0.98**
- Current stock price ($ P_0 $): **\$15.61**
- Dividend growth rate ($ g $): **-13% or -0.13**

### Step 2: Calculate the expected dividend ($ D_1 $)
\[
D_1 = D_0 \times (1 + g)
\]

\[
D_1 = 0.98 \times (1 - 0.13)
\]

\[
D_1 = 0.98 \times 0.87 = 0.8526
\]

### Step 3: Use the Gordon Growth Model
\[
r = \frac{0.8526}{15.61} - 0.13
\]

\[
r = 0.05463 - 0.13
\]

\[
r = -0.07537 \text{ or } -7.54\%
\]

### Conclusion
The required return for Manta Energy's stock, given the continued negative dividend growth rate, is:

\[
\boxed{-7.54\%}
\]

Would you like more details or have any questions about this process?

### Related Questions
1. How does a negative dividend growth rate affect the stock's required return?
2. What other models can be used to determine the required return if dividends are not consistent?
3. Can a stock still be considered a good investment if the required return is negative?
4. How do changes in the dividend yield impact the required return?
5. What assumptions does the Gordon Growth Model rely on, and how can they limit its application?

### Tip
The Gordon Growth Model is most effective for companies with stable dividend growth rates. For firms with irregular dividends, consider other valuation models.

According to your research, the growth rate in dividends for Manta Energy for the previous 10 years has been negative 13 percent. If investors feel this growth rate will continue, what is the required return for the stock?

Learn how to calculate the required return for Manta Energy's stock using the Dividend Discount Model (DDM) with a negative growth rate. This problem involves using the Gordon Growth Model and highlights key financial concepts such as dividend yield, growth rate, and required return calculation. Suitable for finance students and professionals.

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