The actually expected return on a stock based on estimates of future dividends and future price can be compared to the “required” or equilibrium return given its risk. If the expected return is greater than the required return, the stock may be an attractive investment.

First calculate the expected holding-period return (HPR) on Target Corporation’s stock based on its current price, its expected price, and its expected dividend.

a. Go to MSN’s money central at www.msn.com/en-us/money. Get information for Target

(enter TGT under quote search). Find the range of forecasted year-ahead prices. Find the range for estimated target price for the next fiscal year.

b. Collect information about today’s price and the dividend rate. What is the company’s expected dividend in dollars for the next fiscal year?

c. Use these inputs to calculate the range of Target’s HPRs for the next year. P-69