1. If the market price of a share of common stock in Company C is $52,...
1. If the market price of a share of common stock in Company C is $52, the dividend is $2.25, and shareholders expect annual growth in the stock price to be 12%, what is the annual total return the shareholders expect?
Homework Answers
Annual rate of return = Dividend Year 1/Price of stock + growth rate
=(2.25*1.12)/52+0.12
=16.85%
Note: Assumed that the dividend has just been paid, so have calculated year 1 dividend by 2.25*1.12.
If dividend is assumed to be payable for next year than return would be:
=2.25/52+0.12
=16.33%
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