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1 February, 16:19

The stock price of Baskett Co. is $54.10. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.70 next year, what growth rate is expected for the company's stock price? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Growth rate %

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  1. 1 February, 16:29
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    The growth rate is 8.17%

    Explanation:

    The formula to compute the growth rate is as follows:

    g = R - (D1 / P0)

    where

    g is growth rate

    R is return rate which is 15%

    P0 is stock price which is $54.10

    D1 is dividend which is $3.70

    By putting the values in the formula:

    g = 15% - (3.70 / $54.10)

    = 0.15 - 0.0683

    = 0.0817 or 8.17 %
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