What is the expected rate of return on stock

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Reference no: EM131908852

A drug company stock is currently selling for $15 per share. It pays an annual dividend of $1.50, equal to 50% of earnings. Retained earnings are invested in research with a average return of 20% per year.

A. Using the constant-growth divident discount model, what is the expected rate of return on the stock?

B. If the company raises the dividend to $3, what would the price of the stock be?

C. If the company eliminated the dividend, what would the stock price be?

Reference no: EM131908852

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