B E H 1 Homework 7 - Stock Valuation 2 (2) 3 The next dividend payment by Blue Cheese Inc will be $4. 4 The dividends are anticipated to maintain a growth rate of 5 percent a year forever. 5 If the stock currently sells for $40 per share, what is the required return? 6 7 Stock Price =D1/(r-g) D1 = $4 8 = 5% PO = $40 8 r = ? 9 $40 = $4/(R - 5%) (R-5%) = $4/$40 = 10% R = 10 11 12 13 14 15 FS Sheet1 Spet2 Sheet3