Answered: Company BestWare is expected to pay a…

Company BestWare is expected to pay a dividend of $5.14 next year, and the company's stock is currently selling at $59.88. The company's WACC is 12.15%. What's the company's capital gains yield?

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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Question

Company BestWare is expected to pay a dividend of $5.14 next year, and the company's stock is currently selling at $59.88. The company's WACC is 12.15%.

What's the company's capital gains yield?

Definition Definition Increase in the value of a capital asset and the amount that is realized when the asset is sold off. A capital gain may be short-term or long-term depending on the tenure for which the asset is held.

Expert Solution

Given information:

Expected dividend (D₁) is $5.14.

Current stock price (P₀) is $59.88.

WACC (r) is 12.15%.

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