The next dividend payment by Dizzle Inc will be 310 per shar

The next dividend payment by Dizzle, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 3.75 percent, forever. If the stock currently sells for $49.80 per share, what is the required return? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Required return %

Solution

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

(3.10/49.80)+0.0375

which is equal to

=9.97%(Approx).