Ask Question
2 December, 07:04

Kellogg pays $2.00 in annual per share dividends to its common stockholders, and its recent stock price was $82.50. Assume that Kellogg's cost of equity capital is 5.0%. Estimate Kellogg's expected growth rate based on its recent stock price using the dividend discount model with increasing perpetuity. Do not round until your final answer. Round answer to one decimal place (ex: 0.0245 = 2.5%).

+4
Answers (1)
  1. 2 December, 07:31
    0
    2.52%

    Explanation:

    Given that

    Annual dividend paid per share = $2

    Recent stock price = $82.5

    Cost of capital = 5.0%

    So, the expected growth rate is

    Price = Recent dividend * (1 + growth rate) : (cost of equity - growth rate)

    58.73 = $2 * (1 + Growth rate) : (0.05 - Growth rate)

    After solving this, the expected growth rate is 2.52%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Kellogg pays $2.00 in annual per share dividends to its common stockholders, and its recent stock price was $82.50. Assume that Kellogg's ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers