Explore BrainMass

Explore BrainMass

    Growth Rate of Dividends (Constant Rate)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Grant Corporation's stock is selling for $40 in the market. The company's beta is 0.8, the market risk premium is 6 percent, and the risk-free rate is 9 percent. The previous dividend was $2 (i.e., D0 = $2) and dividends are expected to grow at a constant rate.
    What is the growth rate for this stock?

    © BrainMass Inc. brainmass.com October 9, 2019, 5:31 pm ad1c9bdddf

    Solution Preview

    The growth rate can be found by using the dividend discount model. The dividend discount model says that
    Market Price = Expected Dividend ...

    Solution Summary

    The solution explains the calculation of the growth rate in dividends using the constant growth model.