Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
The common stock of Sweet Treats is selling for $50
The common stock of Sweet Treats is selling for $50.60 per share. The company is expected to have an annual dividend increase of 3.7 percent indefinitely and pay a dividend of $3.85 in one year. What is the total return on this stock?
Expert Solution
Computation of Total Return on the Stock:
Share price = Next year dividend/ (Required return - Dividend growth rate)
Here,
Share price = $50.60
Dividend = $3.85
Dividend growth rate = 3.7%
Let's put all the values in the formula to find required rate
50.60 = 3.85/ (X - 0.037)
50.60*X - 1.8722 = 3.85
50.60*X = 3.85 + 1.8722
50.60*X = 5.7222
X = 5.7222/ 50.60
X = 11.31%
So, Total return on the stock is 11.31%
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
