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25 October, 15:14

Shares of do naught common stock are currently selling for $46.90. the last dividend paid was $2.21 per share and the market rate of return is 15.8 percent. at what rate is the dividend growing?

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  1. 25 October, 15:28
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    Here you go,

    Current Selling Price, P0 = $46.90

    Last Dividend Paid, D0 = $2.21

    Market rate of return, r = 15.8%

    Growth rate, g = ?

    D1 = D0 * (1+g)

    D1 = $2.21 * (1+g)

    r = D1/P0 + g

    0.158 = 2.21 * (1+g) / 46.90 + g

    7.4102 = 2.21 + 2.21g + 46.90g

    5.2002 = 49.11g

    g = 0.1059 = 10.59%

    Therefore, the answer is 10.59%
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