Estimate expected rate of return on company stock

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Reference no: EM1364889

1. Constant-Growth Model. Waterworks has a dividend yield of 8%. If its dividend is expected to grow at a constant rate of 5%, Estimate the expected rate of return on the company's stock?

2. Rate of Return. Steady As She Goes, Inc., will pay a year-end dividend of $2.50 per share. Investors expect the dividend to grow at a rate of 4 percent indefinitely.

a. If the stock currently sells for $25 per share, what is the expected rate of return on the stock?

b. If the expected rate of return on the stock is 16.5 percent, what is the stock price?

Reference no: EM1364889

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