Question

5. The common stock of Pendant Publishing currently sells for $72.80 and is expected to pay a dividend next year of $2.84 per share. Of future dividends are expected to grow at a constant rate, and investors require an 8.8% return, what is the expected future growth rate of the dividend

Answer 1

Answer:

4.90%

Explanation:

The computation of the expected future growth rate of the dividend is shown below:

Price of the stock = Next year dividend ÷ (Required rate of return - growth rate)

$72.80 = $2.84 ÷ (8.8% - growth rate)

After solving this, the growth rate is 4.90%

We simply applied the above formula so that the approximate growth rate could come