Ask Question
9 September, 18:29

Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1? a. $2.20 b. $2.44 c. $2.69 d. $2.96 e. $3.25 quilzet

+4
Answers (1)
  1. 9 September, 20:23
    0
    Answer: ke = D1/Po + g

    0.1025 = D1/57.50 + 0.06

    0.1025-0.06 = D1/57.50

    0.0425 = D1/57.50

    D1 = 0.0425 x 57.50

    D1 = $2.444

    Explanation: Cost of equity is equal to dividend in 1 year's time divided by the current market price plus the growth rate. Other variables were provided in the question except the dividend at the end of the year (D1).

    Thus, D1 becomes the subject of the formula. The appropriate cost of equity is $2.44. The correct answer is B.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers