Universal Forest's current stock price is $154.00 and it is likely to pay a $5.23 dividend next year. Since analysts estimate Universal Forest will have a 13.0% growth rate, what is its required return?
A) 16.40%
B) 15.28%
C) 13.62%
D) 14.71%

Question

Quizplus · Accepted Answer

The required return can be calculated using the Gordon Growth Model (Dividend Discount Model): Required Return = (Dividend/Current Stock Price) + Growth Rate = ($5.23/$154.00) + 13.0% = 16.40%.

Universal Forest's Current Stock Price Is $154