The stock price of Webber Co. is $54.30. Investors require a return of 13 percent on similar stocks. Required: If the company plans to pay a dividend of $3.80 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 = .13 – ($3.80 / $54.30) g = .0600, or 6.00%

The stock price of Webber Co. is $54.30. Investors require a return of 13 percent on similar stocks.

Required:

If the company plans to pay a dividend of $3.80 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 = .13 – ($3.80 / $54.30)

g = .0600, or 6.00%