Margo Enterprises stock is valued at 1765 a share The firm p

Margo Enterprises stock is valued at $17.65 a share. The firm pays annual dividends and

        increases those dividends by 4 percent each year. Next year’s dividend will be $1.50 per share. What is the required return on this stock?

SHOW WORK

Solution

Required return ( r) D1÷P0+g Here, Stock price (P0) $                 17.65 Expected dividend (D1) $                   1.50 Growth rate (g) 4.00% Required return ( r) 12.50% 1.5÷17.65+4%