Common stock value-Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.20 per share last year. The company expects eamings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return would result in a price per share of $28? a. The required rate of return for this stock, in order to result in a price per share of $28, is%. (Round to two decimal places.) b. The required rate of return for this stock, in order to result in a price per share of $28, is%. (Round to two decimal places.)
Common stock value-Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.20 per share last year. The company expects eamings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $28? b. If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return would result in a price per share of $28? a. The required rate of return for this stock, in order to result in a price per share of $28, is%. (Round to two decimal places.) b. The required rate of return for this stock, in order to result in a price per share of $28, is%. (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Common stock value-Constant growth McCracken Roofing, Inc., common stock paid a dividend of $1.20 per
share last year. The company expects earings and dividends to grow at a rate of 5% per year for the foreseeable
future.
a. What required rate of return for this stock would result in a price per share of $28?
b. If McCracken expects both earnings and dividends to grow at an annual rate of 10%, what required rate of return
would result in a price per share of $28?
a. The required rate of return for this stock, in order to result in a price per share of $28, is%. (Round to two
decimal places.)
b. The required rate of return for this stock, in order to result in a price per share of $28, is %. (Round to two
decimal places.)
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