Question

The dividend expected next period on Flower Corporation's common syock is $5.55, and the price is $69.38. If the growth rate is 11%, what is the rate of return on this stock?

a) 11%
b) 16%
c) 18%
d) 19%
e) 20%

Answer 1

The rate of return on the stock is 8%.

Step-by-step explanation:

To determine the rate of return on a stock, we use the formula:

Rate of Return = Dividend / Price + Growth Rate

In this case, the dividend expected next period is $5.55 and the price is $69.38. The growth rate is 11%. Plugging these values into the formula:

Rate of Return = $5.55 / $69.38 + 0.11 = 0.080(80%)

So the rate of return on this stock is 8%, which is not one of the options given. Therefore, the correct answer is not provided in the options given.