R&S Oil recently paid a $5.75 annual dividend on its common stock, which is expected to increase at an average rate of 2.5% per year. If the stock is currently trading for $49.95 per share, what is its market rate of return?
Please show all calculations. Thank you.
Required return=(D1/Current price)+Growth rate
=(5.75*1.025)/49.95+0.025
which is equal to
=14.30%(Approx).
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