The Frisco Company just paid $2.20 as its annual dividend. The dividends have been increasing at a rate of 4% annually and this trend is expected to continue. The share is currently selling for $63.60 a share. What is the rate of return on this share?

Question

Quizplus · Accepted Answer

The rate of return can be calculated using the Gordon Growth Model: Rate of Return = (Dividend / Price) + Growth Rate = ($2.20 / $63.60) + 4% = 7.60%.

The Frisco Company Just Paid $2