The next dividend payment by Halestorm, Inc., will be $1.76 per share. The divid

Question

The next dividend payment by Halestorm, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. If the stock currently sells for $34 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The next dividend payment by Halestorm, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. If the stock currently sells for $34 per share, what is the required return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Stock price = D1÷(r-g)

D1 is next expected dividend

r is cost of common stock

g is growth rate

$34 = $1.76÷(r-7%)

Required return, r = 12.18%

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