Question

The Sisyphean​ Company's common stock is currently trading for $ 28 per share. The stock is expected to pay a $ 2.9 dividend at the end of the year and the Sisyphean​ Company's equity cost of capital is 12​%. If the dividend payout rate is expected to remain​ constant, then the expected growth rate in the Sisyphean​ Company's earnings is closest​ to:

Answer 1

1.24%

Step-by-step explanation:

The Sisyphean company's common stock is currently being traded at $28 per share

The dividend is $2.9

The company's equity cost of capital is 12%

= 12/100

= 0.12

Therefore, the expected growth rate is calculated as follows

Growth rate= Equity cost of capital-(Dividend/Current price)

= 0.12-(2.9/28)

= 0.12-0.103571

= 0.01243×100

= 1.24%

Hence the expected growth rate is Sisyphean company's earning is closest to 1.24%