Expected Return The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting?

Question

Quizplus · Accepted Answer

First, we need to calculate the expected future dividends. Using the dividend growth rate of 19%, the expected next dividend would be:

Next dividend = $0.90 x (1 + 0.19) = $1.07

Next, we can use the constant growth model to calculate the expected return:

Expected return = (Expected dividend / Current stock price) + Expected dividend growth rate

Expected return = ($1.07 / $43.17) + 0.19 = 0.046 + 0.19 = 0.236

Converting this to a percentage, we get:

Expected return = 23.6%

So the closest option is C, which is 21.48%.

Expected Return the Buckle (BKE) Recently Paid a $0