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Johnson & Johnson stock is expected to pay a $3.54 annual dividend next year, the current...

Johnson & Johnson stock is expected to pay a $3.54 annual dividend next year, the current stock price is $138, and the expected growth rate in dividends is 5.2 %. Using the dividend discount growth model, what is the expected return?

6%

8%

10%

12%

0 0
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Answer #1

This question requires application of constant growth dividend discount model according to which: Po - Divi T-9 Po = Price of

138 = 3.54 r - 0,052

r - 0.052 = 0.0257

r = 7.77%

r = 8% ---> Answer

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