Question

. A company’s common share has a price of $300, and the company will pay a dividend (D1) of dividend of $9. If the dividend is expected to grow at a constant rate, what would the growth rate be if the required rate of return is 15%?

Answer 1

according to the model of Gordon

$P=\frac{d}{r-g}$

$300=\frac{9}{0.15-g}$

g=0.12 or 12%