CDB stock is currently priced at $76. The company will pay a dividend of $4.41 next year and investors require a return of 10.6 percent on similar stocks. What is the dividend growth rate on this stock

Answer

g = 4.8%

Explaination

We can use the Gordon growth model to calculate stock pice.

P = D(1) /  (r - g)

P: Stock price ($76)

D(1): Dividend paid at year-end ($4.41)

r: required rate of return (10.6%)

g: dividend growth rate (Missing value)

By inputting numbers into the above equation, we have the following:

76 = 4.41 / (0.106 - g)

--> g = 4.8%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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