Kellogg pays $2.00 in annual per share dividends to its common stockholders, and its recent stock price was $82.50. Assume that Kellogg’s cost of equity capital is 5.0%. Estimate Kellogg’s expected growth rate based on its recent stock price using the dividend discount model with increasing perpetuity. Do not round until your final answer. Round answer to one decimal place (ex: 0.0245 = 2.5%).

2.52%

Explanation:

Given that

Annual dividend paid per share = $2

Recent stock price = $82.5

Cost of capital = 5.0%

So, the expected growth rate is

Price = Recent dividend × (1 + growth rate ) ÷ (cost of equity - growth rate)

58.73 = $2 * (1 + Growth rate) ÷ (0.05 - Growth rate)

After solving this, the expected growth rate is 2.52%

explanation:

the contractual interest rate is the interest the borrower must pay and the interest the lender receives, or more simply, it is the interest rate stated on a bond whereas the market interest rate is “the investors demand for loaning funds”. therefore, bonds can either be sold at a premium, face value, or discount.

answer; /// i do believe the correct answer is (30,000);