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15 October, 08:31

The next dividend payment by ZYX, Inc., will be $2.95 per share. The dividends are anticipated to maintain a 4 percent growth rate, forever. If ZYX stock currently sells for $58 per share, the required return is

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  1. 15 October, 10:06


    The required return of ZYX, Inc shall be determined using the following mentioned formula:

    r=[d (1+g) / MV]+g

    In the given question

    r=required rate of return of ZYX, Inc=?

    d (1+g) = next dividend payment to be made by the ZYX, Inc=$2.95

    MV=current selling price of share=$58

    g=growth rate of dividend=4%

    r=required rate of return=[$2.95/$58]+4%

    r=required rate of return=9.09%
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