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    Forecast of growth rate given stock price

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    A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g?

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    Solution Summary

    Your guidance for the dividend is in Excel, attached. Shows the basic equation, an example and then the algebra to solve for the growth rate.