Problem 7-10 Growth Rates [LO 1] The stock price of Baskett Co. is $54.30. Investors require...
Problem 7-10 Growth Rates [LO 1]
The stock price of Baskett Co. is $54.30. Investors require a
return of 13 percent on similar stocks.
If the company plans to pay a dividend of $3.80 next year, what
growth rate is expected for the company’s stock price? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
Growth rate
%
Homework Answers
Required return = (dividend next year/stock price) + growth rate
0.13 = ($3.80/$54.30) + growth rate
0.13 = 0.0699815837937385 + growth rate
growth rate = 0.13 - 0.0699815837937385 = 0.0600184162062615 or 6.00%
Growth rate is 6.00%.
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Problem 7-10 Growth Rates [LO 1]
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