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?
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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.