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Stock's Dividend and Expected Rate of Return

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The expected rate of return on the common stock of NW Corp. is 14 percent. The stock's dividend is expected to grow at a constant rate of 8 percent a year. The stock currently sells for $50 a share. Which of the following statement is most correct?

f. the stocks dividend yield is 8%
g. the stocks dividend yield is 7%
h. the current dividend per share is $4.00
i. the stock price is expected to be $54 a share in one year
j. the stock price is expected to be $57 a share in one year

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Solution Summary

This solution contains calculations to aid you in understanding the solution to stock's dividend and expected rate of return.

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R = 14%
g = 8%
P = $50
By DDM method, we can write:
P = ...

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