The stock price of XYZ Co. is $21.72. Investors require an 9.91 percent rate of return on similarstocks. If the company plans to pay a dividend of $2.17 next year, what constant growth rate (inpercent) is expected for the company's stock price? Answer to two decimals.

It is a valuation model, that calculates the fair value of stock, assuming that the dividends grow…

Answered: The stock price of XYZ Co. is $21.72.…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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The stock price of XYZ Co. is $21.72. Investors require an 9.91 percent rate of return on similar stocks. If the company plans to pay a dividend of $2.17 next year, what constant growth rate (in percent) is expected for the company's stock price? Answer to two decimals.