You’ve collected the following information from your favorite financial website.
ID: 2822685 • Letter: Y
Question
You’ve collected the following information from your favorite financial website.
According to your research, the growth rate in dividends for Palm Coal for the previous 10 years has been 4 percent.
If investors feel this growth rate will continue, what is the required return for Palm Coal stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return %
Yld % PE
Ratio Close
Price Net
Chg Hi Lo 77.6 10.45 Palm Coal .38 2.7 6 14.10 –.24 55.81 33.42 Lake Lead Grp 1.54 3.8 10 40.43 –.01 130.93 69.50 SIR 2.00 2.2 10 88.97 3.07 50.24 13.95 DR Dime .80 5.2 6 15.43 –.26 35.00 20.74 Candy Galore .32 1.5 28 ?? .18
Explanation / Answer
he required return for Palm Coal stock = 0.38*1.04/14.10 + 4%
he required return for Palm Coal stock = 6.80%
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