Description
If the price of Toms Handbags Inc. stock is $43, it required return is 20%, and the last dividend was $3, what is its dividend growth rate? ( Round to the nearest tenth)
Explanation & Answer
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Stock Price = D1 ÷ (k – g)
43 =3/(20-g)
20-g = 3/43 ; 20-g =0.069
g = 20-0.069 = 19.93 %.
Hence Answer = 19.9%