As a stock analyst Mooch covers the common stock of GE, which sells for $11 pershare and just paid a dividend of $.52. The best estimate Mooch can come up is thatthe next two dividends for GE will be $.55 and then $.605, with steady state annualgrowth rate of 10 percent thereafter. What required return per year for the commonstock of GE must be?

The constant growth model is a stock valuation method used in finance to determine a stock's…

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growth rate of 10 percent thereafter. What required return per year for the common stock of GE must be ?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

As a stock analyst Mooch covers the common stock of GE, which sells for $11 per
share and just paid a dividend of $.52. The best estimate Mooch can come up is that
the next two dividends for GE will be $.55 and then $.605, with steady state annual
growth rate of 10 percent thereafter. What required return per year for the common
stock of GE must be?

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