Question: The Duncan Company’s stock is currently selling…
The Duncan Company’s stock is currently selling for $15. People generally expect its price to rise to $18 by the end of next year. They also expect that it will pay a dividend of $.50 per share during the year.
What is the expected return on an investment in Duncan’s stock?
Recalculate the expected return if next year’s price is forecast to be only $17 and the dividend .25.
Calculate the actual return on Duncan if at the end of the year the price turns out to be $13 and the dividend actually paid was just $.10.