Capital Gains Yield ($26.93 - $25.23) / $25.23 6.74% ($28.64 - $26.93) / $26.93 6.35% ($30.36 - $28.64) / $28.64 6.00% Dividend Yield Total Return Year $1.3225/$25.23 5.24% $1.52/$26.93 5.65% $1.72/$28.64 6.00% 1 12% + 2 12% 12%

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
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Summarize and discuss the implications of the findings for the business or potential business transaction.

----------------------

Turbo Technology Computers is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next two years, at 13% in the third year, and at a constant rate of 6% thereafter. Turbo's last dividend was $1.15, and the required rate of return on the stock is 12%.

  1. Calculate the value of the stock today. - $25.23
  2. Calculate P1^ and P2^. -  P1^$26.93;  P2^ $28.63
  3. Calculate the dividend yield and capital gains yield for Years 1, 2, and 3. - Attachment 
Capital Gains Yield
($26.93 - $25.23) / $25.23 6.74%
($28.64 - $26.93) / $26.93 6.35%
($30.36 - $28.64) / $28.64 6.00%
Dividend Yield
Total Return
Year
$1.3225/$25.23 5.24%
$1.52/$26.93 5.65%
$1.72/$28.64 6.00%
1
12%
+
2
12%
12%
Transcribed Image Text:Capital Gains Yield ($26.93 - $25.23) / $25.23 6.74% ($28.64 - $26.93) / $26.93 6.35% ($30.36 - $28.64) / $28.64 6.00% Dividend Yield Total Return Year $1.3225/$25.23 5.24% $1.52/$26.93 5.65% $1.72/$28.64 6.00% 1 12% + 2 12% 12%
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