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The next dividend payment by Zone, Inc., will be $2.08 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $42 per share, what is the required return

Respuesta :

Answer:

10.95%

Explanation:

According to the gordon growth model,

the value of stock (price) = dividend / required return - growth rate

42 = 2.08/ r - 0.06

42(r-0.06) = 2.08

2.08/42 = r - 0.06

r = 10.95%

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