A stock sells for $28; its current dividend is $1.00, and its dividend growth rate is 4.4%. What is the shareholder's required rate of return?

Name: A stock sells for $28; its current dividend is $1.00, and its dividend growth rate is 4.4%. What is the shareholder's required rate of return?
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Quizplus · Accepted Answer

The required rate of return can be calculated using the Gordon Growth Model: Required Rate of Return = (Dividend/Price) + Growth Rate = ($1.00/$28) + 4.4% = 3.57% + 4.4% = 7.97%, which rounds to 8.1%.

A Stock Sells for $28; Its Current Dividend Is $1