Answer:
r = 0.146527 or 14.6527% rounded off to 14.65%
Step-by-step explanation:
Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
Do is dividend today
g is the growth rate
r is the required rate of return
As we have the values for P0, D0 and g, we can calculate the r using the above formula,
48.38 = 5.51 * (1+0.0293) / (r - 0.0293)
48.38 * (r - 0.0293) = 5.671443
48.38r - 1.417534 = 5.671443
48.38r = 5.671443 + 1.417534
r = 7.088977 / 48.38
r = 0.146527 or 14.6527% rounded off to 14.65%