A year ago, when shares in Lanchester plc were selling for £50, the dividend yield was...
A year ago, when shares in Lanchester plc were selling for £50, the dividend yield was 3.5 percent. Today the shares are selling for £36 a share. What is the expected return on this stock if the company maintains a constant dividend growth rate of 3 percent?
Please give details as much as possible.
Homework Answers
Expected Dividend this year=Dividend Yield*Share Price last year=3.5%*50=1.75
Expected return=Dividend this year*(1+growth rate)/current share price+growth rate=1.75*(1+3%)/36+3%=8%
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