Problem:
The common stock of Auto Deliveries sells for $25.96 a share. The stock is expected to pay $2.10 per share next month when the annual dividend is distributed. Auto Deliveries has established a pattern of increasing its dividends by 4.2 percent annually and expects to continue doing so.
Required:
Question: What is the market rate of return on this stock?
- 8.09 percent
- 10.19 percent
- 12.29 percent
- 14.39 percent
- 16.49 percent
Note: Provide support for your underlying principle.