Tyler Industries stock traditionally provides a rate of retu

Tyler Industries stock traditionally provides a rate of return of 13.7 percent. The company just paid an annual dividend of $1.21 a share and recently announced it will commence increasing its dividends by 1.6 percent each year. For this stock to return its traditional rate, what should the market price of this stock be?

Solution

For this stock to return its traditional rate, what should the market price of this stock be

=(D0*(1+g))/(r-g)

=(1.21*(1+1.6%))/(13.7%-1.6%)

=10.16

the above is answer..