Digging Deep Company\'s common stock is currently selling for $173.89 per share.

Question

Digging Deep Company's common stock is currently selling for $173.89 per share. Next year, the company dividend is expected to be $6.70 per share. The projected growth at a rate of dividends for this stock is 2.04 percent per year. What rate of return does the investor expect to receive on this stock if he or she purchases the stock today? Round the answer to two decimal places in percentage form.(Write the percentage sign in the "units" box Your Answer: Answer Save Page 6 of6 Save All Responses Go to Submit Quiz

Explanation / Answer

Based on dividend growth model

Price of security = D1/(r-g)

173.89 = 6.70 / (r-2.04)

r - 2.04 = 6.70/173.89

r = 3.85 + 2.04 = 5.89%

Expected Rate of return = 5.89%

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.