valuation of long term investments

QUESTION

Michaels ltd has just paid ordinary shareholders an annual dividend amount of $1.75 per share and management has announced that it expects future dividends to grow at 4% per annum. The companys ordinary shares are currently selling in the market for $29.50.a) what is the expected rate of return from
Market price of the shre=$29.50 currently paying devidend=$1.75 r =d1/p0 =$1.75/$29.50 =0.0593percent a)expected rate of return= devidend yield growth rate =0.0593 0.04 =9.93% b)if I require 14% return I

ont purchase the shares.Because of the Expected return is coming from the shares 9.93% which is less than the as I required return 14%.

ANSWER:

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