Question

The common stock of RMW Inc. is selling at $88 a share. It just paid a dividend of $4. Investors expect a return of 15 percent on their investment in RMW Inc. From this information, what is the expected growth rate of future dividends?

Select one:
a. 9%
b. 10%
c. 11.5%
d. 12%

Answer 1

12%

Step-by-step explanation:

R=D1/P0+g

15 =4/88+g

15 =0.0454+g

15/15=0.0454/15 +g

g=0.3026

.15-0.03=.12