According to your research, the growth rate in dividends for Palm Coal for the p

Question

According to your research, the growth rate in dividends for Palm Coal for the previous 10 years has been 4.25 percent.

If investors feel this growth rate will continue, what is the required return for Palm Coal stock?

Required:

If investors feel this growth rate will continue, what is the required return for Palm Coal stock?

hi lo stock(div) div yld % PE rato close price net change 77.7 10.46 palm coal 0.39 2.7 6 14.20 -0.24 55.81 33.42 lake lead frp 1.54 3.8 10 40.43 -0.01 130.93 69.50 SIR 2.00 2.2 10 88.97 3.07 50.24 13.95 DR Dime 0.80 5.2 6 15.43 -.026 35.00 20.74 Candy galore 0.32 1.5 28 ?? 0.18

Explanation / Answer

Dividend yield = D1÷Price

2.7% = D1÷$14.2

D1 = $0.3834

Cost of equity, re = D1÷Price+Growth rate

= $0.3834÷$14.2+4.25%

= 6.959%

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