A) The next dividend payment by Wyatt, Inc., will be $3.00 per share. The divide

Question

A) The next dividend payment by Wyatt, Inc., will be $3.00 per share. The dividends are anticipated to maintain a growth rate of 4.25 percent, forever. Required: If the stock currently sells for $49.60 per share, what is the required return?

B)

Rabie, Inc., has an issue of preferred stock outstanding that pays a $6.00 dividend every year, in perpetuity.

If this issue currently sells for $80.60 per share, what is the required return?

If this issue currently sells for $80.60 per share, what is the required return?

Explanation / Answer

1. R = (D1 / P0) + g

R = ($3.00 / $49.60) + 0.0425

R = 0.10298 or 10.29%

2. R = C/P = 6.00/80.60 = 0.0744 = 7.44 %

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