Transportation stocks currently provide an expected rate of return of 15%. ttt, a large transportation company, will pay a year-end dividend of $3 per share. if the stock is selling at $60 per share, what must be the market's expectation of the constant-growth rate of ttt dividends?

The answer is: 10% constant growth rate

Explanation:

Since transportation stocks provide a 15% rate of return, TTT stock should also provide the same rate of return. We can expect to earn $9 (= $60 x 5%) every year from our investment in TTT stocks. We are receiving $3 as dividends, so the constant growth rate should equal the difference between the expected return minus the dividend payments:

We can also calculate this with the following formula:

expected return rate = (dividends / price) + growth rate

15% = (3 / 60) + g

15% = 5% + g

10% = g

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i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101