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Zeta Private Corp has just paid a dividend of $4.54 per share. The company's current stock...

Zeta Private Corp has just paid a dividend of $4.54 per share. The company's current stock price is $44.42 each. If the dividends are expected to grow at a constant rate of 5.2% per year. Determine the investors required rate of return.

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Answer #1

Dividend (D0) = $ 4.54 per share

Current stock price = $ 44.42

Growth rate = 5.2%

Required rate of return = [D0 * (1+g) / P0 ]+ g

= [ ($4.54 * 1.052) / $44.42] + 0.052

= 0.1595 or

15.95 %

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