Question

Redan, Inc., is expected to maintain a constant 5.75 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.25 percent, what is the required return on the company’s stock?

Answer 1

the Required return on the company stock is 10.00%

Step-by-step explanation:

The computation of the required return on the company stock is shown below;

The Required return on the company stock is

= Dividend yield + Capital gains yield

= 4.25% + 5.75%

= 10.00%

Hence, the Required return on the company stock is 10.00%

We simply applied the above formula so that the correct value could come

And, the same is to be considered