What is the required rate of return on a stock with a $2.50 expected dividend and a $19 price with 6% growth?

Business & Finance Homework Help – 4 Problems| Business & Finance homework help

You can calculate the required return for an investment with $2.50 in expected dividends, $19 as a price and 6% annual growth using this formula:

Dividend Yield divided by (capital gain Yield multiplied by growth rate) = Required Rate Of Return

Dividend Yield = 2.50/19 = 0.1316

Capital Gain Yield = (2.50 – 19.50 = 0.8684

Needed Rate of Return = 0.1316 + (0.8684 by 0.06)
0.15% = 0.1563