Shares of Bleckwell Remodelers common stock are currently selling for $32.50 a share. The last annual dividend paid was $2.25 per share. The market rate of return is 14%. At what rate is the dividend growing?

Question

Quizplus · Accepted Answer

The correct answer is A because the dividend growth rate can be calculated using the Gordon Growth Model: Dividend Growth Rate = (Current Dividend / Current Stock Price) * (Market Rate of Return - Dividend Yield). Plugging in the given values, we get: Dividend Growth Rate = (2.25 / 32.50) * (0.14 - (2.25 / 32.50)) = 0.0662 or 6.62%.

Shares of Bleckwell Remodelers Common Stock Are Currently Selling for $32.50