Silo Builders recently paid a dividend of $0.72.Their ordinary shares are currently trading at $18.72 in the market.Silo Builders' shareholders require a return of 8% p.a.What is the implied rate of growth of Silo Builders' dividends?

Question

Quizplus · Accepted Answer

Using the Gordon Growth Model, we can calculate the implied rate of growth of Silo Builders' dividends:

$0.72 / ($18.72 x (1 + 0.08)) = 0.04 or 4.00%

Therefore, the answer is D, 4.00%.

Silo Builders Recently Paid a Dividend of $0