A firm's stock is expected to pay a $3 annual dividend next year,the current stock price is $60,and the expected growth rate in dividends is 8%.Using the Gordon approach,what is the expected return?

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Quizplus · Accepted Answer

The Gordon Growth Model (Dividend Discount Model) formula is: Expected Return = (Dividend/Current Price) + Growth Rate. Here, Expected Return = ($3/$60) + 8% = 5% + 8% = 13%.

A Firm's Stock Is Expected to Pay a $3 Annual