Question


The stock price of Webber Co. is $68. Investors require an 11 percent rate of return on similar stocks.

Required:
If the company plans to pay a dividend of $3.85 next year, what growth rate is expected for the company’s stock price?
.11*68 = 7.48
7.48 - 3.85 = 3.63 expected increase in price
3.63 = x (68)
x = .0533 or 5.3%
5.3%

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