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Homework answers / question archive / Priority Shift Ltd is expected to grow at a constant rate of 9 percent
Priority Shift Ltd is expected to grow at a constant rate of 9 percent. If the company's next dividend is $2.75 and its current price is $37.35, what is the required rate of return on this share?
Next Dividend ( D1 ) = $ 2.75
Current Price of the stock ( P0 ) = $ 37.35
Growth rate ( g ) = 9%
Current Price of the stock ( P0 ) = D1 / ( Ke - g )
37.35 = 2.75 / ( Ke - 0.09 )
( Ke - 0.09 ) = 2.75 / 37.35
Ke= 0.07362 + 0.09
Ke= 0.16362 or 16.36%
