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The stock price of Alps Co. is $54.30. Investors require a return of 13 percent on similar stocks. If the company plans to pay a dividend of $3.80 next year, what growth rate is expected for the company’s stock price?

Respuesta :

Tundexi

Answer:

Growth rate = 6%

Explanation:

Required rate of return = 13%

Stock price = 54.30

D1 = $3.80

P0 = D1 / Ke- g

$54.30 = $3.80 / 13% - g

13% - g(54.30) =  3.80

7.059 - 54.30g = 3.80

- 54.30g = 3.80 - 7.059

- 54.30g = -3.259

g = -3.259 / - 54.30

g = 0.0600184162062615

g = 6%

Thus, the Growth rate = 6%

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