Consider four different stocks, all of which have a required return of 20 percent and a most recent dividend of $4.30 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and -5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 11 percent growth rate thereafter. What is the dividend yield for each of these four stocks? What is the expected capital gains yield for each of these four stocks?
Consider four different stocks, all of which have a required return of 20 percent and a most recent dividend of $4.30 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and -5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 11 percent growth rate thereafter. What is the dividend yield for each of these four stocks? What is the expected capital gains yield for each of these four stocks?
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 20 percent and a most recent dividend of $4.30 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent, and -5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 11 percent growth rate thereafter. What is the dividend yield for each of these four stocks? What is the expected
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