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Spartan Sofas, Inc. is selling for $50.00 per share today. In one year, Spartan will be...

Spartan Sofas, Inc. is selling for $50.00 per share today. In one year, Spartan will be selling for $48.00 per share, and the dividend for the year will be $3.00. What is the return on Spartan? Is it 1 or 2 Explain
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Answer #1

We have following information -

Spartan Sofas, Inc. is selling for $50.00 per share today

Spartan will be selling for $48.00 per share in one year

The dividend for the year will be $3.00

Therefore dollar return on Spartan for one year = selling price per share in one year + dividend in one year - selling price per share today

= $48 + $3 - $50

=$51 -$50

= $1

Percentage return on Spartan for one year = {(selling price per share in one year + dividend in one year - selling price per share today)/ selling price per share today} *100

= {($48 + $3 -$50)/$50} *100

= {$1/$50} *100

= 0.02 * 100

= 2%

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