Virgo Airlines will pay a $4 dividend next year on its common stock, which is currently selling at $100 per share. What is the market's required return on this investment if the dividend is expected…

The correct answer is D. 9 Percent. See the full explanation below for the reasoning.

Investment Management

Question

Virgo Airlines will pay a $4 dividend next year on its common stock, which is currently selling at $100 per share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever?

Options

A4 Percent
B5 Percent
C7 Percent
D9 Percent

How the community answered

(45 responses)

A
16% (7)
B
4% (2)
C
7% (3)
D
73% (33)

Topics

#dividend discount model#Gordon growth model#required return#stock valuation

Community Discussion

No community discussion yet for this question.

Full CTFA Practice