Answered

Explore Westonci.ca, the top Q&A platform where your questions are answered by professionals and enthusiasts alike. Our platform offers a seamless experience for finding reliable answers from a network of experienced professionals. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.

What is the expected constant growth rate of dividends for a stock currently priced at Php 50, that is expected to pay a dividend of Php 5 next year, and has a required return of 20%?

Sagot :

Parrain

Answer: 10%

Explanation:

Using the Gordon Growth Model, the price of a stock can be calculated as follows:

Price = Next dividend / (Required return - growth rate)

Notice that we are provided with all the figures in the formula above except the growth rate so we can calculate the growth rate with these figures:

50 = 5 / (20% - growth rate)

50 * (20% - growth rate) = 5

20% - growth rate = 5 / 50

-growth rate = 10% - 20%

-Growth rate / -1 = -10% / -1

Growth rate = 10%

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Get the answers you need at Westonci.ca. Stay informed with our latest expert advice.