Question

The stock price of Alps Co. is $53.50. Investors require a return of 13 percent on similar stocks. If the company plans to pay a dividend of $3.40 next year. what groeth rate is expected for the company's stock price?

Answer 1

The expected growth rate for the company's stock price is 9.7%. This is calculated by subtracting the dividend yield (3.40/53.50 = 0.0635) from the required return (13%).