TC Corp paid a dividend today of 5 per share The dividend is

TC Corp paid a dividend today of $5 per share. The dividend is expected to grow at a constant rate of 6.5% per year. If TC Corp stock is selling for $50.00 per share, the stockholders\' expected rate of return is

A.

11.50%.

B.

16.50%.

C.

17.15%.

D.

13.56%

Solution

Today\'s Price = Next dividend / (rate on return - Growth rate)

=$5/$50 + .065
=0.1+0.065

=0.165

16.50% option b