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Expected total return on stock

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If Do = $2.00, g (which is constant) = 6%, and Po = $40, what is the stock's expected total return for the coming year?

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Solution Summary

Calculates expected return on stock.

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The Dividend discount model is
Po = D1/(r-g)

D1= dividend next year = Dividend this year (D0) x (1+ growth rate) = $ 2.00 x (1+ 6%)= $2.12
g= growth rate = 6%

P0= $40
r= ...

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