Computer stocks currently provide an expected rate of return of 17%. MBI, a large computer company,...
Computer stocks currently provide an expected rate of return of 17%. MBI, a large computer company, will pay a year-end dividend of $2.10 per share.
a. If the stock is selling at $51 per share, what must be the market's expectation of the dividend growth rate?
Homework Answers
expected rate of return=(D1/Current price)+Growth rate
0.17=(2.1/51)+Growth rate
Growth rate=0.17-(2.1/51)
=12.88%(Approx).
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Computer stocks currently provide an expected rate of return of
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