**Problem Statement: Calculating the Stock's Expected Total Return**Given the following information:- Dividend (D1) = $1.25- Growth rate (g) = 5.5% (constant)- Current stock price (P0) = $44Question: What is the stock's expected total return for the coming year?**Explanation:**To calculate the stock's expected total return, you can use the formula:\[\text{Expected Total Return} = \frac{D1}{P0} + g\]Where:- $\frac{D1}{P0}$ represents the dividend yield.- $g$ is the growth rate.By substituting the given values:1. Calculate the dividend yield: $\frac{1.25}{44}$2. Add the growth rate of 5.5% to the dividend yield obtained in step 1.This will provide you with the stock's expected total return for the coming year.

A stock is a type of investment that represents an ownership share in a company. . When you purchase…

Answered: = $1.25, g (which is constant) = 5.5%,…

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= $1.25, g (which is constant) = 5.5%, and PO = $44, what is the stock's expected total return for the coming year?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

**Problem Statement: Calculating the Stock's Expected Total Return**

Given the following information:

- Dividend (D1) = $1.25
- Growth rate (g) = 5.5% (constant)
- Current stock price (P0) = $44

Question: What is the stock's expected total return for the coming year?

**Explanation:**

To calculate the stock's expected total return, you can use the formula:

\[
\text{Expected Total Return} = \frac{D1}{P0} + g
\]

Where:
- $\frac{D1}{P0}$ represents the dividend yield.
- $g$ is the growth rate.

By substituting the given values:

1. Calculate the dividend yield: $\frac{1.25}{44}$
2. Add the growth rate of 5.5% to the dividend yield obtained in step 1.

This will provide you with the stock's expected total return for the coming year.

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