Super Computer Companys stock is selling for 100 per share t
Super Computer Company\'s stock is selling for $100 per share today. It is expected that—at the end of one year—it will pay a dividend of $6 per share and then be sold for $114 per share. Calculate the expected rate of return for the shareholders.
Solution
Buying price of share = $100 (today)
Selling price of share after 1 yr = $114
Dividend = $6/share/year
Expected ROR = (Profit/Buying price)*100% = {(114+6-100)/100} *100% = 20%
