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# Rate of Return on an Investment

I'm trying to find the value of a common stock if

A. the firm's earnings and dividends are growing annually at 10 percent, the current dividend is \$1.32, and investors require a 15 percent return on investments in common stock?

b. What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the risk free rate is 9 percent, and the return on the market is 15 percent?

c. If the price of the stock is \$35, what is the rate of return offered by the stock? Should the investor acquire this stock?

2. What is the annual rate of return on an investment in a common stock that cost \$40.50 if the current dividend is \$1.50 and the growth in the value of the shares and the dividend is 8 percent?

#### Solution Preview

I'm trying to find the value of a common stock if

A. the firm's earnings and dividends are growing annually at 10 percent, the current dividend is \$1.32, and investors require a 15 percent ...

#### Solution Summary

This provides the steps to compute rate of return on an investment

\$2.19