Question: Calculate the expected return on equity using the Dividend Discount Model under the following factors: Dividend just paid: $2.75 Price of the stock: $51.25 Return

Calculate the expected return on equity using the Dividend Discount Model under the following factors: Dividend just paid: $2.75 Price of the stock: $51.25 Return on Equity: 13.6% Dividend Payout Ratio: 55% Hint: Growth rate is based on Retention Ratio and ROE and Dividend has to be moved forward one year at the growth rate to arrive at the number used in the formula. Formula is Rs = (Div1/P) + g.

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