reddick enterprises' stock currently sells for $50.00 per share. the dividend is projected to increase at a constant rate of 5.50% per year. the required rate of return on the stock, rs, is 9.00%. what is the stock's expected price 3 years from today?

Question

26-10-2022
Business

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reddick enterprises' stock currently sells for $50.00 per share. the dividend is projected to increase at a constant rate of 5.50% per year. the required rate of return on the stock, rs, is 9.00%. what is the stock's expected price 3 years from today?

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RajeevKumarBag RajeevKumarBag · Answer 1 · 2022-10-29T10:01:59-04:00

The profit generated by a company's operating activities is paid to the common investors as a dividend. Retained earnings are the sum that is not distributed and is added to the balance sheet.

Dividend: The current selling price plus (Rate of return - Growth rate)

(9% - 5.5%) = $35.50 * Dividend

Dividend = 35.50 times 3.5%

Dividend equals $35.50 times 0.03

$1.2425 is the dividend.

Stocks' Three-Year Expected Price = Dividend * (1 + Growth Rate) Time / Return Rate - Growth Rate

How Do Dividends Work?

A dividend is a payment made by a corporation to its shareholders that is decided by the board of directors. Dividend payments are frequently made quarterly and might take the form of cash payments or stock reinvestments.

To learn more about dividend from the given link.

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