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Rate of return on stock.

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Miranda Corp. is expected to pay a dividend of $2.00 at the end of the year. The growth rate is 6%. Currently the stock is trading in the secondary market at $40 per share.

What rate of return is the market requiring of the stock this year, based on the dividend discount model? Assume the growth factor is constant and that the stock price is at equilibrium.

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Miranda Corp. is expected to pay a dividend of $2.00 at the end of the year. The growth rate is 6%. Currently the stock is trading in the secondary market at $40 per ...

Solution Summary

The expert calculates the rate of return based on the dividend discount model. The growth factors which is consistent with the stock price at equilibrium is determined.

$2.19