Expected Return Home Depot (HD)recently paid a $0.90 dividend.The dividend is expected to grow at a 17 percent rate.At the current stock price of $33.08,what is the return shareholders are expecting?
A)2.70 percent
B)17.03 percent
C)17.18 percent
D)20.18 percent

Question

Quizplus · Accepted Answer

The expected return can be calculated using the Gordon Growth Model: Expected Return = (Dividend/Price) + Growth Rate = ($0.90/$33.08) + 0.17 = 0.0272 + 0.17 = 0.2018 or 20.18 percent.

Expected Return Home Depot (HD)recently Paid a $0