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Question Help ​(Common stockholder expected return​) ​Bennett, Inc. common stock currently sells for ​$ 20.25 20.25...

Question Help ​(Common stockholder expected return​) ​Bennett, Inc. common stock currently sells for ​$ 20.25 20.25 per share. The​ company's executives anticipate a constant growth rate of 9.4 9.4 percent and an​ end-of-year dividend of ​$ 1.25 1.25. a. What is your expected rate of return if you buy the stock for ​$ 20.25 20.25​? b. If you require a return of 18 18 ​percent, should you purchase the​ stock?

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Answer #1

a) Expected return =Expected dividend/current price+growth

Expected return =1.25/20.25+9.4%

Expected return =15.57%

b) No, will not purchase the stock

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