Gail Dribble is analyzing the shares of Petscan Radiology. Petscan's stock pays a dividend once each year,

Question:

Gail Dribble is analyzing the shares of Petscan Radiology. Petscan's stock pays a dividend once each year, and it just distributed this year's $0.85 dividend. The market price of the stock is $12.14. Gail estimates that Petscan will increase its dividends by 7% per year forever. After contemplating the risk of Petscan stock, Gail is willing to hold the stock only if it provides an annual expected return of at least 13%. Should she buy Petscan shares or not?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...