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You just purchased 100 shares of company CXC’s stock at 45 dollars per share for long...

You just purchased 100 shares of company CXC’s stock at 45 dollars per share for long term investment. The most recent dividend per share is $1.50 per share. We also know the dividend growth rate is expected to be 8% per year. What is your expected annual percentage return of this investment? (Please round up your answers to two decimals and write in percentage points without the sign. e.g. If your answer is 12.859%, type 12.86 without the percentage sign)

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Answer #1

Price of Stock = Expected Dividend/(Return on Equity – growth rate)

45 = 1.50(1.08)/(Return – 8%)

Return = 11.6%

Hence, expected annual percentage return of this investment = 11.6%

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