Tuesday, September 27, 2011

What is the required rate of return on the stock?

Cartwright Brother's stock is currently selling for $40 a share. The stock is expected to pay a $2 dividend today. The stock's dividend is expected to grow at a constant rate of 7% per year forever. What is the required rate of return on the stock?|||Theoretically the stock price would grow related to earnings and dividend growth. But nothing is certain or guaranteed, so it can change in an instant based on what investors think will happen. You cannot count on anything happening forever.

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