Estimating expected rate of return on the stock/> Managerial Economics
Computing expected rate of return, required rate of return on a stock. Assume Walmart stock currently sells for $30 per share. The stock just paid a dividend of $0.75 per share.
The dividend is expected to grow at a constant rate of 10% a year. The risk-free return is 3%
and the market risk premium is 8% . The stock has a beta of 1.2 .
A. What is the expected rate of return on the stock?
B. What is the required rate of return on the stock?
C. Will the stock price increase or decrease.
