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20 August, 23:14

The next dividend payment by halestorm, inc., will be $2.16 per share. the dividends are anticipated to maintain a growth rate of 5 percent forever. if the stock currently sells for $44 per share, what is the required return?

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  1. 20 August, 23:29
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    Required rate of return = 9.9 % (Approx)

    Explanation:

    Given:

    Anticipated dividend = $2.16 per share

    Stock price = $44 per share

    Growth rate = 5% = 5 / 100 = 0.05

    Required rate of return = ?.

    Computation of Required rate of return:

    Required rate of return = [Dividend per share / Stock price] + Growth rate

    Required rate of return = [$2.16 / $44] + 0.05

    Required rate of return = [0.0490] + 0.05

    Required rate of return = 0.099

    Required rate of return = 9.9 % (Approx)
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