A company has common stock which paid a dividend of $2.75 per share last year. The company expects that earnings and dividends will grow by 15% for the next tw years before dropping to a constant 9% growth rate afterward. The required rate of return is 13%. 4 a) What is the current price per share of the stock? b) What is the expected market price of the share in one year? c) Calculate the expected dividend yield at the end of the first year d) Calculate the expected capital gains yield at the end of the first year
A company has common stock which paid a dividend of $2.75 per share last year. The company expects that earnings and dividends will grow by 15% for the next tw years before dropping to a constant 9% growth rate afterward. The required rate of return is 13%. 4 a) What is the current price per share of the stock? b) What is the expected market price of the share in one year? c) Calculate the expected dividend yield at the end of the first year d) Calculate the expected capital gains yield at the end of the first year
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company has common stock which paid a dividend of $2.75 per share last year.
The company expects that earnings and dividends will grow by 15% for the next two
years before dropping to a constant 9% growth rate afterward. The required rate of
return is 13%.
h
a) What is the current price per share of the stock?
b) What is the expected market price of the share in one year?
c) Calculate the expected dividend yield at the end of the first year
d) Calculate the expected capital gains yield at the end of the first year
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