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Homework answers / question archive / The stock price of Alps Co
The stock price of Alps Co. is $53.70. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.50 next year, what growth rate is expected for the company's stock price?
Current Stock Price (P0) = $53.70
Expected Dividend (D1) = $ 3.50
Required Return (r) = 15 %
Growth rate (g)= ?
r = (D1/P0) + g
15%= (3.50/ 53.70)+ g
15%- (3.50/ 53.70)= g
g= 0.0848 or 8.48%
