Consider four different stocks, all of which have a required return of 18.5 percent and a most recent dividend of $2.90 per share.Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 11 percent, 0 percent, and-5.5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20.5 percent for the next two years andthen maintain a constant 13 percent growth rate, thereafter.a. What is the dividend yield for each of these four stocks?Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.b. What is the expected capital gains yield for each of these four stocks?Note: A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.a. Stock W dividend yieldStock X dividend yieldStock Y dividend yieldStock Z dividend yieldb. Stock W capital gains yieldStock X capital gains yieldStock Y capital gains yieldStock Z capital gains yield%%%%%%%%B

Stock WRequired return = 18.5%Current dividend = $2.90Growth rate = 11%The price of stock is The…

Answered: Consider four different stocks, all of…

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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Consider four different stocks, all of which have a required return of 19% and a most recent dividend of $2.40 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 8%, 0%, and -5% per year respectively. Stock Z is a growth stock that will increase its dividend by 20% for the next two years and then maintain a constant 12% growth rate thereafter. What is the dividend yield for each of these four stocks? What is the expected capital gains yield? Discuss the relationship among the various returns that you find for each of these stocks. Please show work with formulas no excel. ..
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