Question

Hamilton Company common stock is currently selling for $60 per share. The stock will pay a dividend of $4.35 next year. If you buy the stock now, receive the dividend and sell the stock at the end of the year, for what price will you sell the stock if you earn your 11% required rate of return? Group of answer choicesa) $65.55

b) $70.05

c) $55.10

d) $67.80

e) $62.25

Answer 1

e. $62.25

Step-by-step explanation:

The computation of required rate of return is shown below:-

Required rate of return = Selling per share × (1 + Rate of interest) - Dividend

= $60 × (1 + 11%) - $4.35

= $60 × 1.11 - $4.35

= $66.6 - $4.35

= $62.25

Therefore for computing the required rate of return we simply we simply applied the above formula.