Schlumberger is selling for $ 64.91 per share and paid a dividend of $ 1.10 last...
Schlumberger is selling for $ 64.91 per share and paid a dividend of $ 1.10 last year. The dividend is expected to grow at 4 percent indefinitely. What is the stock's expected rate of return?
Homework Answers
Ans 5.76%
| P0 = | Price of Share |
| D1 = | Current Dividend |
| Ke = | Cost of Equity |
| g = | growth rate |
| P0 = | D1 / (Ke - g) |
| 64.91 = | 1.1440 / (Ke - 4%) |
| Ke - 4% = | 1.1440 / 64.91 |
| Ke - 4% = | 1.76% |
| Ke = | 1.76% + 4% |
| Ke = | 5.76% |
| D1 = | D0* (1 + g) |
| D1 = | 1.10* (1 + 4.00%) |
| D1 = | 1.1440 |
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