Homework SourseYouve collected the following information from your favorite
You’ve collected the following information from your favorite financial website.
According to your research, the growth rate in dividends for DR Dime for the previous 10 years has been negative 11 percent.
If investors feel this growth rate will continue, what is the required return for DR Dime stock? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return %
| 52-Week Price | Stock (Div) | Div Yld % | PE Ratio | Close Price | Net Chg | |
| Hi | Lo | |||||
| 77.40 | 10.43 | Palm Coal .36 | 2.6 | 6 | 13.90 | –.24 |
| 55.81 | 33.42 | Lake Lead Grp 1.54 | 3.8 | 10 | 40.43 | –.01 |
| 130.93 | 69.50 | SIR 2.00 | 2.2 | 10 | 88.97 | 3.07 |
| 50.34 | 14.05 | DR Dime .90 | 5.8 | 6 | 15.53 | –.26 |
| 35.00 | 20.74 | Candy Galore .32 | 1.5 | 28 | ?? | .18 |
Solution
required rate of return for DR Dime = 0.90*(1-0.11)/15.53 - 11%
required rate of return for DR Dime = -5.84%
