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Required Rate of Return Calculator

This Required Rate of Return Calculator helps you estimate the return needed from an investment based on dividend income and expected growth.

Investment Return Requirement Estimator

Input Fields
D
$
Enter the current annual dividend paid by the stock
P
$
Enter the current price of the stock
g
%
Enter the expected annual growth rate of the dividend
If enabled, the result will update automatically when you change any value.

Required Rate of Return Formula

Formula
$$k = \frac{D}{P} + g$$

Where:

  • $$k$$ = Required rate of return
  • $$D$$ = Expected dividend
  • $$P$$ = Current stock price
  • $$g$$ = Dividend growth rate (as decimal)


Required Rate of Return – Calculation Example

Let’s say a stock pays a $2.00 dividend, the current price is $40.00, and the dividend is expected to grow at 5% annually.

Calculation:

  1. $$k = \frac{2}{40} + 0.05 = 0.05 + 0.05 = 0.10$$

So, the required rate of return is 10%.


The Required Rate of Return Calculator uses the Gordon Growth Model to estimate the minimum return an investor expects from an equity investment. It’s useful for evaluating stock attractiveness or setting discount rates in valuation. This metric ensures that returns align with risk and growth expectations.

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2 thoughts on “Required Rate of Return Calculator”

  1. Dee says:
    27.04.2021 at 16:32

    I can’t input anything into this calculator on mobile or a laptop.

    Reply
    1. Dee says:
      27.04.2021 at 16:35

      Correction: I can’t input things out of order. Here’s my problem: “If the RRR were 15%, how much money would be created by an initial deposit of $3,000?” This is impossible to input.