Sidman Products common stock currently sells for 47 a share

Sidman Products\' common stock currently sells for $47 a share. The firm is expected to earn $5.17 per share this year and to pay a year-end dividend of $3.80, and it finances only with common equity.

If investors require a 11% return, what is the expected growth rate? Round your answer to two decimal places

Solution

current sellingprice = 47

Earnings = 5.17

Dividend = 3.80

11% return = 47x11% = 5.17

The difference = 5.17-3.80 = 1.37

Expected growth = 5.17/3.80 136.05%