Raffalovich, Inc., is expected to maintain a constant 6.25 percent growth rate in its dividends, indefinitely. Required: If the company has a dividend yield of 4.75 percent, what is the required return on the company’s stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Required return % Explanation: The required return of a stock is made up of two parts: The dividend yield and the capital gains yield. So, the required return of this stock is: R = Dividend yield + Capital gains yield R = .0475 + .0625 R = .1100, or 11.00%

Raffalovich, Inc., is expected to maintain a constant 6.25 percent growth rate in its dividends, indefinitely.

Required:

If the company has a dividend yield of 4.75 percent, what is the required return on the company’s stock?(Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Required return

%

 
Explanation:

The required return of a stock is made up of two parts: The dividend yield and the capital gains yield. So, the required return of this stock is:

R = Dividend yield + Capital gains yield

R = .0475 + .0625

R = .1100, or 11.00%