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expected return american eagle outfitters (aeo) recently paid a $.44 dividend. the dividend is expected to grow at a 16.10 percent rate. at the current stock price of $24.67, what is the return shareholders are expecting? multiple choice 16.12% 18.17% 16.10% 17.92%

Respuesta :

18.17% return the shareholders are expecting.

According to the constant dividend growth model

price = d1 / (r - g)

Next dividend to be paid=(0.44 x 1.1610)

Cost of equity= r

Growth rate=0.1610

24.67 = (0.44 x 1.1610) / (r - 0.1610)

24.67 x (r - 0.1610) = 0.51084

(r - 0.1610) = 0.02070

cost of equity, r= 0.2070+0.1610

cost of equity, r = 0.1817

                          = 18.17%

shareholders return expecting = 18.17%

A person or legal organisation that is officially recognised by a corporation as the owner of shares of the share capital of a public or private corporation is referred to as a shareholder.

learn more about cost of equity here

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