A company is evaluating the investment opportunity in a stock. The stock is currently trading at $50 per share and is expected to pay a dividend of $2 per year. The dividend is expected to grow at a constant rate of 5% per year. The company requires a rate of return of 10% on its investments. What is the expected rate of return on the stock in the form of price appreciation and dividends, and what is the price of the stock in 5 years?

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The detailed answer for the above question is provided below The expected rate of return on a stock can be calculated using the dividend discount mode... View the full answer