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Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.25 at the end of the year. Its dividend is expected to grow at a constant rate of 6.50% per year. If Walter’s stock currently trades for $20.00 per share, what is the expected rate of return? 734.38% 17.75% 1,385.00% 660.56%

Respuesta :

Answer:

The expected rate of return is 17.75%

Explanation:

In order to calculate the expected rate of return we would have to calculate the following formula according to the given data:

expected rate of return= (expected dividend/price)+growth

expected rate of return= ($2.25/$20)+6.50%

expected rate of return=0.1125+0.0650

expected rate of return=0.1775

expected rate of return=17.75%

The expected rate of return is 17.75%

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