A stock is expected to pay a dividend of $2.32 next year, and the current share price is $51. If the required return of the stock is 11 percent, what is the perpetual growth rate in dividends?

Question

Quizplus · Accepted Answer

The formula to calculate perpetual growth rate is g = (D / P) + r, where D is the dividend, P is the current share price and r is the required return. 
g = (2.32 / 51) + 0.11
g = 0.0645 or 6.45% 
Therefore, the correct answer is C, 6.45%.

A Stock Is Expected to Pay a Dividend of $2