Question

Super computer company's stock is selling for rs.100 per share today. it is expected that at the end of one year it will pay a dividend of rs.8 per share and then be sold for rs.115 per share. calculate the expected rate of return for the shareholders

a. 20%
b. 23%
c. 15%
d. 25%

Answer 1

The expected rate of return for the shareholders of the super computer company is b. 23%.

Step-by-step explanation:

To calculate the expected rate of return for the shareholders, we need to consider the dividend and the expected selling price of the stock. In this case, the dividend is rs.8 per share and the expected selling price is rs.115 per share. The expected rate of return can be calculated using the formula: [(Dividend + Expected Selling Price) / Stock Price] - 1

Let's calculate the expected rate of return:

[(8 + 115) / 100] - 1 = 123 / 100 - 1 = 23%

Therefore, the expected rate of return for the shareholders is 23%.