Alaskan foodstuffs just announced the annual dividend for this coming year will be $0.36 a share and all future dividends are expected to increase by 4.5 percent annually. what is the market rate of return if the stock is currently selling for $12.20 a share?

Question

Molly Waters

Business

13 July, 04:42

Alaskan foodstuffs just announced the annual dividend for this coming year will be $0.36 a share and all future dividends are expected to increase by 4.5 percent annually. what is the market rate of return if the stock is currently selling for $12.20 a share?

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Alisa Richmond · Answer 1

Price of share is $12.2. Future dividend is therefore expected to grown by 4.5%. To find the rate of return i. e. K, we will do the following steps:

= 0.36 (1.045) / 12 = 0.03135+4.5 = 4.53135

Therefore, rate of return is 4.53%.