You buy a share of The Ludwig Corporation stock for $19.60. You expect it to pay dividends of $1.02, $1.0710, and $1.1246 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $22.69 at the end of 3 years. a. Calculate the growth rate in dividends. Round your answer to two decimal places. % b. Calculate the expected dividend yield. Round your answer to two decimal places. % c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places. %
You buy a share of The Ludwig Corporation stock for $19.60. You expect it to pay dividends of $1.02, $1.0710, and $1.1246 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $22.69 at the end of 3 years. a. Calculate the growth rate in dividends. Round your answer to two decimal places. % b. Calculate the expected dividend yield. Round your answer to two decimal places. % c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer 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:Return on Common Stock
You buy a share of The Ludwig Corporation stock for $19.60. You expect it to pay dividends of $1.02, $1.0710, and $1.1246 in Years 1, 2,
and 3, respectively, and you expect to sell it at a price of $22.69 at the end of 3 years.
a. Calculate the growth rate in dividends. Round your answer to two decimal places.
%
b. Calculate the expected dividend yield. Round your answer to two decimal places.
%
c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain
the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required
rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places.
%
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