### What is the required return

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##### Reference no: EM13333980

1. If the dividend in year 0 is \$1.20 and the growth rate is 3%, then the dividend in Year 7 is equal to:

a. \$1.20 X (1.03)5.
b. \$1.20 X (1.03)6.
c. \$1.20 X (1.03)7.
d. \$1.20 X (1.03)8.

2. You observe a stock price of \$18.75. You expect a dividend growth rate of 5% and the next expected dividend payment is \$1.50. What is the required return?:

a. 5.0%
b. 13.0%
c. 13.4%
d. 15.2%

3. A company is expected to pay their first annual dividend 3 years from now. That payment will be \$1.50 a share. Starting in Year 4, the company will increase the dividend by 5% per year. The required return from common shareholders is 15%. What is the estimated value of this stock today?

a. \$11.34
b. \$13.04
c. \$15.28
d. \$16.50

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