Question

3. The common stock of Bruner Aeronautics sells for $80 a share. The stock expects to pay $2 per share next month when the annual dividend is distributed. The company has a established a pattern of increasing their dividends by 2% annually. What is the market rate of return on this stock?

Answer 1

$80=\frac{2}{m-0.02}$

$m=0.045$

m- market rate of return