Expected Return American Eagle Outfitters (AEO) recently paid a $.42 dividend. The dividend is expected to grow at a 15.90 percent rate. At the current stock price of $24.47, what is the return shareholders are expecting?

17.89%

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

24.47 = (0.42 x 1.1590) / (r - 0.1590)

24.47 x (r - 0.1590) = 0.487

(r - 0.1590) =0.01989

r = 0.1789 = 17.89%

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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