A stock is trading at $55 per share. The stock is expected to have a year-end dividend of $3 per share (D1 = $3), and it...
A stock is trading at $55 per share. The stock is expected to have a year-end dividend of $3 per share (D1 = $3), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g? Round the answer to three decimal places.
%
Homework Answers
| Price = Dividend in 1 year/(cost of equity - growth rate) |
| 55 = 3/ (0.16 - Growth rate) |
| Growth rate% = 10.545 |
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