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A share is worth $56.50 today according to the dividend discount model (DDM). A dividend of $1.30 per share is payable in one year. The dividend will be paid each year at a constant growth rate. If the rate of return is 12% p.a effective, calculate the annual growth rate of the dividends. (Round your answer to the nearest 0.01%.)

A share is worth $56.50 today according to the dividend discount model (DDM). A dividend of $1.30 per share is payable in one year. The dividend will be paid each year at a constant growth rate. If the rate of return is 12% p.a effective, calculate the annual growth rate of the dividends. (Round your answer to the nearest 0.01%.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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b) A share is worth $56.50 today according to the dividend discount model (DDM). A dividend of $1.30 per share is payable in one year. The dividend will be paid each year at a constant growth rate. If the rate of return is 12% p.a effective, calculate the annual growth rate of the dividends. (Round your answer to the nearest 0.01%.)
Transcribed Image Text:b) A share is worth $56.50 today according to the dividend discount model (DDM). A dividend of $1.30 per share is payable in one year. The dividend will be paid each year at a constant growth rate. If the rate of return is 12% p.a effective, calculate the annual growth rate of the dividends. (Round your answer to the nearest 0.01%.)
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