Question

CDB stock is currently priced at $85. The company will pay a dividend of $5.69 next year and investors require a return of 11.6 percent on similar stocks. What is the dividend growth rate on this stock?

Answer 1

4.91%

Step-by-step explanation:

CDB stock is currently priced at $85

The company will pay a dividend of $5.69

The required return is 11.6%

There for the dividend growth rate on this stock can be calculated as follows

11.6/100= (5.69/85) + growth rate

0.116= 0.0669 + growth rate

0.116 - 0.0669 = growth rate

0.0491 × 100 = growth rate

Growth rate = 4.91%