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Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year i the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%

Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year i the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%

Essentials Of Investments
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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Please help me solve question 7.2a. I able to calculate the price of the stock is $25 and dividend yield is 2%. I need help

solve capital gain rate.

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Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year in the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%
Transcribed Image Text:Example 7.2a: Suppose Target Corporation paid $0.50 per share in dividends this year. If its equity cost of capital is 10% and dividends are expected to grow by 8.0% per year in the future, estimate the value of Target's stock. A. $25.00 B. $26.00 C. $27.00 D. $28.00 Example 7.2a: What dividend yield and capital gain rate would you expect at this price? A. 2% and 8% B. 1.85 % and 7.15% C. 1.85% and 8% D. 2% and 7.15%
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