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Common stock value—Constant growth??? McCracken? Roofing, Inc., common stock paid a dividend of ?$1.41 per share last...

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Finance

Common stock value—Constant growth???

McCracken? Roofing, Inc., common stock paid a dividend of ?$1.41per share last year. The company expects earnings and dividends togrow at a rate of 5?% per year for the foreseeable future.??

a.??What required rate of return for this stock would result ina price per share of? $28??

b. If McCracken expects both earnings and dividends to grow atan annual rate of 11?%, what required rate of return would resultin a price per share of ?$28??

Answer & Explanation Solved by verified expert
3.8 Ratings (512 Votes)
Information provided Last years dividend 141 Growth rate 5 Current stock price 28 The question is solved using the dividend discount model aThe stocks required rate of return is calculated using    See Answer
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Common stock value—Constant growth???McCracken? Roofing, Inc., common stock paid a dividend of ?$1.41per share last year. The company expects earnings and dividends togrow at a rate of 5?% per year for the foreseeable future.??a.??What required rate of return for this stock would result ina price per share of? $28??b. If McCracken expects both earnings and dividends to grow atan annual rate of 11?%, what required rate of return would resultin a price per share of ?$28??

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