The stock price of Webber Co. is $53.80. Investors require a return of 12 percent on similar stocks. Required: If the company plans to pay a dividend of $3.55 next year, what growth rate is expected for the company’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Growth rate % Explanation: We need to find the growth rate of dividends. Using the constant growth model, we can solve the equation for g. Doing so, we find: g = R – (D1 / P0) g = .12 – ($3.55 / $53.80) g = .0540, or 5.40%

The stock price of Webber Co. is $53.80. Investors require a return of 12 percent on similar stocks.

Required:

If the company plans to pay a dividend of $3.55 next year, what growth rate is expected for the company’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Growth rate

%

Explanation:

We need to find the growth rate of dividends. Using the constant growth model, we can solve the equation for g. Doing so, we find:

g = R – (D1 / P0)

g = .12 – ($3.55 / $53.80)

g = .0540, or 5.40%