Question
The next dividend payment by ECY, Inc will be $3.20 per share. The dividends are anticipated to maintain a growth rate of 6 percent, forever.
The next dividend payment by ECY, Inc will be $3.20 per share. The dividends are anticipated to maintain a growth rate of 6 percent, forever.
If ECY stock currently sells for $63.50 per share, what is the required return?
Price of the stock = Dividend (D0)/(r-g), r = return rate , g = growth rate, P = price
Given, p = 63.50, D1=3.20, g=0.06
So, r = D0/P + g = 3.20/63.5+0.06 = 0.050346 = 5.03%
Is this correct?
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Derivatives Markets
Authors: Robert L. McDonald
2nd Edition
032128030X, 978-0321280305
