Question

a stock will pay dividend of $4 at the end of the year. it sells today for $104 and it its dividends are expected grow at a rate of 9%. what is the implied rate of return on this stock

Answer 1

the implied rate of return on the stock is 14.80%

Step-by-step explanation:

The computation of the implied rate of return is shown below:

The Rate of return is

= (Dividend at year 1 ÷ share price) + growth rate

= ( $6 ÷ 104) + 0.09

= 0.058 + 0.09

= 14.80%

We simply applied the above formula

And, the same is to be considered

hence, the implied rate of return on the stock is 14.80%