Expected Return A company's current stock price is $84.50 and it is likely to pay a $3.50 dividend next year. Since analysts estimate the company will have a 10% growth rate, what is its expected return?
A) 4.14%
B) 4.26%
C) 10.00%
D) 14.14%

Question

Quizplus · Accepted Answer

The expected return can be calculated using the formula: Expected Return = (Dividend/Current Stock Price) + Growth Rate. Here, it is ($3.50/$84.50) + 10% = 4.14% + 10% = 14.14%.

Expected Return a Company's Current Stock Price Is $84