The common stock of Pizza Deliveries sells for 2456 a share

The common stock of Pizza Deliveries sells for $24.56 a share. The stock is expected to pay $1.45 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 4 percent annually and expects to continue doing so. What is the market rate of return on this stock?

Solution

the market rate of return on this stock = 1.45/24.56 + 4%

the market rate of return on this stock = 9.90%