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Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $34.12, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Required return

Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $34.12, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Required return

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 25P
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Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $34.12, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Required return
Transcribed Image Text:Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 percent next year and then reduce its dividend growth rate by 6 percentage points per year until it reaches the industry average of 6 percent dividend growth, after which the company will keep a constant growth rate forever. If the stock price is $34.12, what required return must investors be demanding on the company's stock? (Hint: Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Required return
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