XYZ Corp. paid a dividend today of $5 per share. The dividend is expected to grow at a constant rate of 6.5% per year. If XYZ Corp. stock is selling for $50.00 per share, what is the stockholders' expected rate of return? ?
Required to show the following 3 steps for this problem:
(i) Describe and interpret the assumptions related to the problem.
(ii) Apply the appropriate mathematical model to solve the problem. Describing the breakdown of what each variable does for the problem.
(iii) Calculate the correct solution to the problem.