Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 14.5 percent rate. At a current stock price of $44.12, what is the return shareholders are expecting?

a) 15.69%

b) 14.10%

c) 12.74%

a) 15.69%

Explanation:

The computation of the expected return is shown below:

= (Current year dividend : current price) + growth rate

where,

Current year dividend = Dividend * (1 + dividend growth rate)

= $0.46 * (1 + 14.5%)

= $0.527

And, the other item values remain the same

Now put these values to the above formula

So, the value would be equal to

= ($0.527 : $44.12) + 0.145

= 15.69%