Grateful Eight Co. is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the required return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Grateful Eight Co. is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the required return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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
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![Problem 8-5 Stock Valuation [LO1]
Grateful Eight Co. is expected to maintain a constant 5 percent growth rate in its
dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the
required return on the company's stock? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F35965c83-49a0-4a61-abb5-b01d5b731ec3%2Fd3833070-30db-41b2-a0f8-914af3c79c49%2Fqasx3bf_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 8-5 Stock Valuation [LO1]
Grateful Eight Co. is expected to maintain a constant 5 percent growth rate in its
dividends indefinitely. If the company has a dividend yield of 6.8 percent, what is the
required return on the company's stock? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return
%
Expert Solution
Step 1
Given information:
Constant growth rate in dividends is 5%
Dividend yield is 6.8%
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