maricelajacinto1931 maricelajacinto1931

02-01-2021
Business

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What constant-growth rate in dividends is expected for a stock valued at $32.40 if next year's dividend is forecast at $2.20 and the appropriate discount rate is 13.6%

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topeadeniran2 topeadeniran2

03-01-2021

Answer: 6.81%

Explanation:

To calculate the growth rate, we'll use the formula:

Price = Expected Dividend / Discount - Growth rate

32.40 = 2.20 / 13.60% - Growth rate

13.6% - Growth rate = 2.20/32.40

Growth rate = 13.60% - 6.79%

Growth rate = 6.81%

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