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The common stock of Eddie's Engines, Inc. sells for $18 a share. The stock is expected to pay $1.58 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing their dividends by 2.8% annually and expects to continue doing so. What is the market rate of return on this stock

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abiolataiwo2015

Answer:

11.6%

Explanation:

Calculation for What is the market rate of return on this stock

Using this formula

Rate of return=D/P + g

Where,

D=1.58 per share

P=$18

g=.028

Let plug in the formula

Rate of return=1.58/$18+.028

Rate of return =0.088+.028

Rate of return=0.116*100

Rate of return=11.6%

Therefore the market rate of return on this stock will be 11.6%