ooo Verizon LTE 9:39 PM ezto.mheducation.com C The stock price of Jenkins Co. is

Question

ooo Verizon LTE 9:39 PM ezto.mheducation.com C The stock price of Jenkins Co. is $48. Investors require a 12.00 percent rate of return on similar stocks. Required: If the company plans to pay a dividend of $3.90 next year, what growth rate is expected for the company's stock price? (Select rounded answers as directed, but do not use the rounded numbers in intermediate calculations.) 0+12% 03% 0427% Learning Objective: 07-01 Assess how stock prices depend on future dividends and dividend growth Previous attempt

Explanation / Answer

Stock price, P0 = D1÷(r-g)

D1 is next expected dividend

r is required return

g is growth rate

$48 = $3.90÷(12%-g)

Growth rate, g = 3.88%

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