The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g)is which of the following,where D1 is the next dividend and Vc is the current value of the stock?

Question

Quizplus · Accepted Answer

The formula for calculating the expected rate of return on a stock whose dividends are growing at a constant rate (g) is given by the Gordon growth model:

R = D1/Vc + g

Where R is the expected rate of return on the stock, D1 is the next dividend, and Vc is the current value of the stock. Option B is the correct formula.

The Expected Rate of Return on a Share of Common