Answer:
The required rate of return for Johnson and Johnson is 16.85%
Explanation:
Johnson and Johnson paid an annual dividend of $2.110 last year, the geometric growth rate was 13.04 percent during last ten years.
To find out the expected dividend to be paid be Johnson and Johnson this year.
= [$2.110(1.1304)]
= $2.385
Required Rate of Return is calculated by the following formula,
R = [tex]\frac{expected dividend}{current share price} + growth rate for dividend[/tex]
R = 2.385/62.55 + 0.1304
R = .1685, or 16.85%
Answer:
13.08%
Explanation:
Use the dividend model to calculate Required return
given P=$62.55
g=13.04%
D0=2.110
r=?
The formula P=D1/r-g
First calculate D1 =2.110×1.1304
=2.385
substitute in the formula and solve for r
62.55 = 2.385/r-13.04
Cross multiply we get
62.55r-815.652 = 2.385
62.55r=818.037
62.55r/62.55=818.037/62.55
r=13.078/13.08%
