Question

The common stock of Macy's Inc. sells for $43.19 a share. The stock is expected to pay $2.28 per share next year. Analysts forecast that Macy's is expected to grow its per-share dividend payment by 2.15% annually for the foreseeable future. What is the required rate of return on Macy's stock?

Answer 1

Rate of Return over a 5 year period on Macy’s Inc share is 28%

Step-by-step explanation:

Definition:

Rate of Return or ROR is calculated as the gain or loss of an investment over a specified period. Period could be years. It is expressed in percentage of the initial investment value. The gains include income received and additional capital realized on the fair value sale of the investment.

The formular for calculating the rate is defined as:

(Future Value less the Current Value divided by the Current Value) * 100.

`(Future Value - Current Value)/(Current Value) * 100`

Detailed explanation on the incremental amount per year on each dividend is depicted in the attached image.