Final answer:
The expected return for AI's stock, based on an annual dividend of $1.34 per share, a current stock price of $21.39, and a growth rate of 7%, is 13.26%.
Step-by-step explanation:
When assessing the expected return from an investment in Alberta Inc. (AI), we consider the current annual dividend and the expected growth rate. The artificial intelligence (AI) distributes a yearly dividend of $1.34 for each share. If the stock is trading at $21.39, and the expected growth rate is 7%, the expected return is calculated using the Gordon Growth Model (Dividend Discount Model).
The formula for this model is: Expected Return = (Dividend per Share / Current Stock Price) + Growth Rate = ($1.34 / $21.39) + 7%.
First, calculate the dividend yield: ($1.34 / $21.39) = 0.0626 or 6.26%. Next, add this to the growth rate: 6.26% + 7% = 13.26%. Therefore, the expected return for AI's stock is 13.26%.