Gen-Y corporation's current stock price is $50 per share and investor's return is 12%. If current dividends are $4 per share, calculate the dividend growth rate.

Question

Quizplus · Accepted Answer

The dividend growth rate can be calculated using the Gordon Growth Model: Return = (Dividend/Price) + Growth Rate. Solving for Growth Rate: 12% = ($4/$50) + Growth Rate, Growth Rate = 12% - 8% = 4%. However, the closest option is 3.37%.

Gen-Y Corporation's Current Stock Price Is $50 Per Share and Investor's