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What is the expected rate of return from the ordinary shares

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Question - Teal plc has a market capitalisation of $30 million and forecast post-tax profits for the forthcoming year of $10 million. The company has an issued share capital of $1 million, which is made up of $0·50 ordinary shares. The policy of Teal plc is to maintain a constant dividend cover of 2·5 times. Dividends are expected to increase by 5% per annum for the foreseeable future. What is the expected rate of return from the ordinary shares?

A. 8.3%

B. 18.3%

C. 21.7%

D. 31.7%

Reference no: EM133011374

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