Purchase Solution

Dividend Growth Rate

Not what you're looking for?

Ask Custom Question

What is the expected constant growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4, and has a required return of 18%?
A) 3.41%
B) 5.50%
C) 9.26%
D) 12.5%

Purchase this Solution
Solution Summary

This solution calculates the expected constant growth rate of a stock.

Solution Preview

The following equation is used to calculate the price of a stock given a constant growth ...

Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Motivation

This tests some key elements of major motivation theories.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Constant growth valuation formula for stocks

    Required return (rs) = 13% (Given) Expected Dividend growth rate (g)= 5% Dividend growth rate = Capital gains yield Dividend yield (Dy) = 8% (Given) Capital gains yield= 5% = 13%-8% ; required return = dividend yield

  • Computing Share Price in a Year

    Use the Gordon Dividend Growth Model to find the rate of dividend growth: Present price = Next dividend/(required rate of return-growth rate) $35.00 = $.80/(.133-growth rate) $4.655 - $35*growth rate = .80 -$35*growth rate = -$3.855 Growth rate

  • Equilibrium Expected growth rate

    Stock price = Dividend / (Required rate of return - dividend expected growth rate) We have, 34.50 = 1.5/(11.5% - dividend expected growth rate) 11.5% - dividend expected growth rate = 4.35% dividend expected growth rate = 11.5% - 4.35% =

  • Historical Growth Rate and Dividend Yields for a Company

    14915 Historical Growth Rate and Dividend Yields for a Company The current dividend yield for a company in $1.46 and the dividend eight years ago was $0.585.

  • Return on stocks

    Use the constant growth valuation formula to evaluate each stock's next expected dividend, current price, required return, expected dividend growth rate, and dividend yield. Assume the market is in equilibrium.

  • Dividend growth rate

    Calculate the dividend growth rate. Dividend growth rate The dividend growth is commonly expressed by the retention growth equation g = ROE x Retention Ratio.

  • Valuing stocks

    The sustainable growth rate is Return on Equity X (1-Dividend payout ratio) Stock A - Growth Rate = 15% X (1-0.5) = 7.5% Stock B - Growth Rate = 10% X (1-0.6667) = 3.33% c. WE use the dividend discount model, to find the proper stock price.

  • key drivers affecting the stock price

    Price = Dividend x [(1+growth rate) / (expected return - growth rate)] Today's dividend is $10. The expected rate of return in the market is 15% and the firm's growth rate is 3%. The firm pays out half of its growth in dividends.

  • Dividends less than required return

    When using the dividend growth model in computing for the value of a stock, the denominator which is the required rate of return less the dividend growth rate should be positive, meaning the rate of return must be greater than the dividend growth rate

  • Ludwig Corporation: Growth Rate in Dividends and Yield

    Calculate the growth rate in dividends. b. Calculate the expected dividend yield. c.

View More Related Solutions