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The next dividend payment by Savitz, Inc., will be $1.96 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $39 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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ijaz4308

Answer:

9.03%

Explanation:

The required rate of return for  Savitz, Inc., shall be determined through the following mentioned formula:

r=[d(1+g)/P] +g

In the given question

r=required rate of return=?

d(1+g)=next dividend payment to be made= $1.96 per share

g=growth rate=4%

P= current selling price of share=$39

r=[$1.96/$39] +4%

r=9.03%

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