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Common stock valuation. 10 points?
You intend to purchase Marigo common stock at $50 per share, hold it for 1 year and then sell it after a dividend of $6 is paid. How much will the stock price have to appreciate for you to satisfy your required rate of return of 15%?
2 Answers
- CocoLv 77 years agoFavorite Answer
15% = $6 / $50 + growth rate
Growth rate= 15% - ($6 / $50) = 5%.
5% growth on $50 per share stock over 1 year = $2.50
- Rigal TLv 67 years ago
Ignoring the interim, including the ex-dividend date, at least 3% or $1.50, if they're asking this from a math perceptive. ie if this is for an entry level course, Managerial Finance something like that.
Have to hold it a year and a day for the lower tax rate. I know it doesn't matter for your textbook problem, just saying.
