Question

The common stock of dayton repair sells for $43.19 a share. the stock is expected to pay $2.28 per share next year when the annual dividend is distributed. the firm has established a pattern of increasing its dividends by 2.15 percent annually and expects to continue doing so. what is the market rate of return on this stock?​

Answer 1

Hello there!

Answer:

7.43%

Explanation:

To find the market rate of return on the Dayton repair stock, we would need  to use it's selling price, expected pay, and the 2.15%.

Lets solve:

First, we divide 2.28 by 43.19.

2.28 ÷ 43.19 = 0.0527899976846492

Now we add the 2.15%. In order for us to add it, we would need to move the decimal places two times to the left. We would add 0.0215 to 0.0527899976846492.

0.0527899976846492 + 0.0215 = 0.0742899976846492

Now we would need to move the decimal places over, and round to the nearest hundredths.

7.428

The 8 would round and change the 2 into a 3

7.43.

The market rate of return for the stock would be 7.43%