Question

The next dividend payment by Dizzle, Inc., will be $3.05 per share. The dividends are anticipated to maintain a growth rate of 4.00 percent, forever. If the stock currently sells for $49.70 per share, what is the required return price?

Answer 1

Required return =10.1%

Step-by-step explanation:

required return price is given by following relation

`Required return=(Dividend\ payable\ next\ year)/(current\ stock\  price)+growth rate`

from the above information

dividend payable next year is = $3.05

current stock price = $$49.70

growth rate = 4.00%

putting all value to get required return

`Required return= =(3.05)/(49.70)+0.04`

Required return = 0.101

Required return =10.1%