Expected Return A company's current stock price is $22.00 and its most recent dividend was $0.75 per share. Since analysts estimate the company will have a 12% growth rate, what is its expected return?
A) 3.00%
B) 3.48%
C) 12.00%
D) 15.82%

Question

Quizplus · Accepted Answer

To calculate the expected return, we need to use the dividend discount model formula:

Expected Return = (Dividend/Current Stock Price) + Growth Rate

Expected Return = ($0.75/$22.00) + 12% = 3.41% + 12% = 15.82%

Therefore, the expected return is 15.82%, which is option D.

Expected Return a Company's Current Stock Price Is $22