ABC Inc. has a dividend yield equal to 3% and is expected to grow at a 7% rate for the next 7 years. What is ABC's required return?
A) 10%
B) 11%
C) 4%
D) 5%

Name: ABC Inc. has a dividend yield equal to 3% and is expected to grow at a 7% rate for the next 7 years. What is ABC's required return? A) 10% B) 11% C) 4% D) 5%
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Question

Quizplus · Accepted Answer

The required return can be calculated using the Gordon Growth Model (Dividend Discount Model) formula: Required Return = Dividend Yield + Growth Rate. Here, it is 3% + 7% = 10%.

ABC Inc Has a Dividend Yield Equal to 3% and Is