question archive Centex Corporation stock is currently selling for $42
Centex Corporation stock is currently selling for $42
Subject:FinancePrice:2.87 Bought7
Centex Corporation stock is currently selling for $42.00. It is expected to pay a dividend of $4.62 at the end of the year. Dividends are expected to grow at a constant rate of 6.0% indefinitely. Compute the required rate of return on Centex Corporation stock.
17.66%
15.64%
11.0896
17.00%
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Answer:
The rate of return is computed as follows:
= (Dividend expected / price) + growth rate
= ($ 4.62 / $ 42.00) + 6%
= 11% + 6%
= 17%
