Tory's Corp common stock currently trades for $120.00 and is projected to pay a dividend of...
Tory's Corp common stock currently trades for $120.00 and is projected to pay a dividend of $8.00 per share next year. Assuming that Greshak's average historical return on equity is 11.2%, the risk free rate is 2.5% and the constant growth rate for the company is projected to be 3.0%, what is the market's required rate of return on the company's common stock (rounded)?
Homework Answers
We can calculate the required rate of return by solving the below equation:
D1 = next year dividend, r = required rate of return, g= growth rate
So the required rate of return is 9.67%
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