EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Financial Accounting Question
Transcribed Image Text:The future earnings, dividends, and common stock price of Stark Dynamics
Inc. are expected to grow by 7% per year. Stark's common stock currently sells
for $30.00 per share; its last dividend was $2.50, and it will pay a $2.68
dividend at the end of the current year.
If the firm's bonds earn a return of 10.5%, based on the bond-yield-plus-risk-
premium approach, what will be the required rate of return (r_s)? Round your
answer to two decimal places.
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