A company's estimated growth rate in dividends is 7%, its current stock price is $45, and its expected annual dividend is $3

Finance Aug 23, 2020

A company's estimated growth rate in dividends is 7%, its current stock price is $45, and its expected annual dividend is $3. Using the DCF approach, what is the firm's rs.

Expert Solution

Computation of the firm's required rate of return (rs):-

Required rate of return = (D1 / Current stock price) + Growth rate

= ($3 / $45) + 7%

= 6.67% + 7%

= 13.67%

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