The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. What is the market rate of return if the stock is currently selling for $49.10 a share?

rate of return = 9.44 %

Explanation:

given data

dividend D = $3.26

dividends increasing g = 2.8 %

currently selling S = $49.10

to find out

market rate of return

solution

we will apply here rate of return formula that is

rate of return = D / S + g ... 1

put here all these value D = 3.26, S = 49.10 and g = 2.8% in equation 1

rate of return = D / S + g

rate of return = 3.26 / 49.10 + 2.8%

rate of return = 0.06639 + 0.028

rate of return = 0.09439

so rate of return = 9.44 %