## Valuation of Corporate Securities

Self-Paced Overview

### Rate of Return

#### Investors' Required Rate of Return on Common Stock

By manipulating the Gordon formula, the investors' required rate of return may be estimated.

k_{s} = |
D_{1} |
+ g |

P_{0} |

For example, find the investors' required rate of return on a share of common stock selling for $100, current dividends of $3 and a dividend growth rate of 4%.

k_{s} = |
3.12 | + .04 | = 7.12% |

100 |