Question

At the last minute, Jenna considers investing in Coca-Cola stock at a price of $55.55 per share. The stock just paid an annual dividend of $1.76 and she expects the dividend to grow at 4% annually. If the next dividend is due in one year, what expected return is Coca-Cola stock offering

Answer 1

the expected return is Coca-Cola stock offering is 7.3%

Step-by-step explanation:

The computation of the expected return is shown below:

Expected return is

= (D1 ÷ Current price) + Growth rate

= [($1.76 × 1.04) ÷ 55.55] + 0.04

= (1.8304 ÷ 55.55) + 0.04

= 7.3%

Hence, the expected return is Coca-Cola stock offering is 7.3%

The same is to be considered

We simply applied the above formula