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Mercier Corporation's stock is selling for $95. It has just paid a dividend of $5 a...

Mercier Corporation's stock is selling for $95. It has just paid a dividend of $5 a share. The expected growth rate in dividends is 8 percent. What is the required rate of return on this stock?

Please Kindly Show Step By Step Using EXCEL Formula Thank you

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Answer #1

Dividend growth model gives the following formula:

=D1/Current price + growth rate

=5(1.08)/95 + 0.08

=13.6842%

Or the excel formula:

=(5*(1.08))/95+0.08

I hope it's clear if not, you can ask in the comment section.

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