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Total Construction sells a share of common stock for $28.16. Annual dividends next year is expected...

Total Construction sells a share of common stock for $28.16. Annual dividends next year is expected to be $1.35 and has over the years been increasing its dividends by 3% annually. What is the expected rate of return on the company’s stock if it expects to continue the same growth pattern in the coming years?

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Answer #1

expected rate of return=(D1/Current price)+Growth rate

=(1.35/28.16)+0.03

which is equal to

=7.79%(Approx).

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