Question
Asked Feb 8, 2020
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Holtzman Clothiers stock currently sells for $38 a share. It just paid a dividend of $2 share. the dividend is expected to grow at a rate of 5% a year. What stock price is expected 1 year from now? What is the required rate of return?

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Expert Answer

Step 1

Given that;
Recent dividend paid is $2
Price today is $38
Growth rate is 5%

Step 2

We will use the following formula to determine the required return and stock price 1 year from now.

Finance homework question answer, step 2, image 1

Substituting the values in the equation, we get;

Step 3

Finance homework question answer, step 3, image 1

 

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