Question

Given the following information, which of the following firms has the lowest required rate of return? Group of answer choices

a. Schuldig Co. has a current share price of $5.50, an expected dividend of $1.05 per share, and a negative growth rate of 10%.
b. Iccarus Inc. has a current share price of $275.80, an expected dividend of $3.10, and a growth rate of 14%
c. Simpson, LLC. has a current share price of 94.30, an expected dividend of $3.00, and a growth rate of 10%.
d. I don't know that!

Answer 1

Shuldig Co. has the lowest required rate of return

Step-by-step explanation:

Shuldig Co.

$5.50 = $1.05 / (Re + 10%)

Re = 19% - 10% = 9%

Iccarus Inc.

$275.80 = $3.10 / (Re - 14%)

Re = 1.1% + 14% = 15.1%

Simpson LLC.

$94.30 = $3.00 / (Re - 10%)

Re = 3.2% + 10% = 13.2%