r 8-Stocks Question 6 (of 10) value: 10.00 points The next annual dividend payme

Question

r 8-Stocks Question 6 (of 10) value: 10.00 points The next annual dividend payment by Halestorm, Inc., will be $1.64 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. If the stock currently sells for $31 per share, what is the required annual return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Required return References eBook & Resources Learning Objective: 08-01 How stock prices depend on future dividends and dividend growth Worksheet Difficulty: Basic Section, 8.1 Common Stock Valuation

Explanation / Answer

SOLUTION

Required rate of return = 13.29%

R = Required return

D1 = Dividend

P0= Price

g = growth rate

R = (D1 / P0) + g

=($1.64 / $31.00) + 8%

= 5.29% +8%

= 13.29%

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