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Submitted by zliverpool on Sat, 2011-12-03 22:15

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# Bates Inc. pays a dividend of $1 and is currently selling for $32.50. If investors require a 12 % return on their investment from buying Bates stock, what growth rate would Bates Inc. have to provide the investors?

Answer

Submitted by shahimermaid on Tue, 2013-12-24 06:28

price: $1.00

## complete solution with calculations

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present price = next xxxxxxxx x xxxxxxx

xxxxx x $1(1+g) / (0.12 x g)

32.50 = 1 + g / 0.12 - g...rearrange....

xxxxxxxxxx - g) x 1 + xxx

3.9 x 32.50g x 1 x g

xxx x xxxxxxxx

x x xxxxxxxxx

g= 8.66%

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