Thursday, 31 July 2014

The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to

The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 3.75 percent, forever.

Required:
If the stock currently sells for $49.80 per share, what is the required return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Required return %  




Explanation:
We need to find the required return of the stock. Using the constant growth model, we can solve the equation for R. Doing so, we find:


R = (D1 / P0) + g
R = ($3.10 / $49.80) + .0375
R = .0997, or 9.97%