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Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for
Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
I have the information below, I need to know how you get the answer.
Expected dividend (D1) $1.25
Stock price $32.50
Required return 10.5%
Dividend yield 3.85%
Growth rate = rs -D1/P0 = 6.65%
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