Muji earned $10 million for the fiscal year. The firm also paid out 25 percent of its earning as dividend. This policy remains in foreseeable future. The remaining 75 percent of earnings is retained for further investment. The company has 1.25 million shares of common stock outstanding. The current stock price is $40.00. Based on its recent financial statement, its return on equity is 11 percent and is expected to continue in the future. 

Compute the required rate of return on the stock.

Answer rating: 100% (QA)

To compute the required rate of return on the stock we can use the dividend discount model DDM formu... View the full answer