Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. Current price per share of common stock $37.01 Expected dividend per share next year $1.39 Constant annual dividend growth rate 8.4% Risk-free rate of return 5.2%

Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. Current price per share of common stock $37.01 Expected dividend per share next year $1.39 Constant annual dividend growth rate 8.4% Risk-free rate of return 5.2%

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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Given the following information for the stock of Foster Company, calculate the risk premium on its common stock.

Current price per share of common stock	$37.01
Expected dividend per share next year	$1.39
Constant annual dividend growth rate	8.4%
Risk-free rate of return	5.2%

Definition Definition Dividend rate is the percentage of total net income distributed as dividend to the shareholders.

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