The common stock of Kyocera currently sells for $88.50 and its current dividend is $1.10. Determine...
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The common stock of Kyocera currently sells for $88.50 and its current dividend is $1.10. Determine the growth rate for Kyocera assuming that an investor's required rate of return is 14% and that earnings and dividends are expected to grow at a constant rate.
A. 13.9%
B. 12.3%
C. 13.8%
D. 12.6%
Homework Answers
Required return=(D1/Current price)+Growth rate
0.14=(1.1*(1+Growth rate))/88.5+Growth rate
0.14=(1.1+1.1*Growth rate)/88.5+Growth rate
0.14=0.0124293785+0.0124293785*Growth rate+Growth rate
Growth rate=(0.14-0.0124293785)/(0.0124293785+1)
=12.6%(Approx).
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