Managed Healthcares current stock price is 25 its next per s

Managed Healthcare’s current stock price is $25, its next per share dividend (assumed to be paid annually) is forecasted to be $1.00, and analysts expect the company to grow at a constant annual rate of 10 percent. What is the stock’s expected rate of return?

Solution

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

=(1/25)+0.10

which is equal to

=14%