Common stock question 3

Business & Finance
Tutor: None Selected Time limit: 1 Day

Digging Deep Company's common stock is currently selling for $143.46 per share. Next year, the company dividend is expected to be $10.29 per share. The projected growth at a rate of dividends for this stock is 2.12% per year. What rate of return does the investor expect to receive on this stock if he or she purchases the stock today?

Oct 3rd, 2015

Thank you for the opportunity to help you with your question! IF you have any clarification, please don't hesitate to ask and I will do my best to answer. ++++++++++++

Rate of return = ($10.29/$143.46) + 2.12% = 9.29%

Here, since the dividend presented is the dividends one year from now, we no longer multiplied the dividends with (1+2.12%).

Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 18th, 2015

when calculating the equation, i got 2.19. How did you get 9.29%

Sep 18th, 2015

Nevermind, I got it. Thanks!

Sep 18th, 2015

Great. I stepped out for a bit.

Sep 18th, 2015

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