2. Lawton Company common stock currently sells for $38 and pays (year 0) a dividend of...
2. Lawton Company common stock currently sells for $38 and pays (year 0) a dividend of $2. Determine the implied growth rate for Lawton assuming that an investor's required rate of return is 12 percent and using a constant growth valuation model. a. 6.74 percent b. 17.26 percent c. 6.40 percent d. 1.28 percent no excel please. needs long way. tha
Homework Answers
| Stock price = Expected Dividend /Rquired return - growth rate | |||
| $38 = ($2+ growth rate)/0.12- growth rate | |||
| $4.56 - (38* growth rate) = $2+ growth rate | |||
| Growth rate =0.064 | |||
| Growth rate = 6.40% | |||
| Correct Option : c | |||
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