QUESTION FIVE A. A stock originally sold for K25 per share and ten years later, now sells for K40.The dividend last paid was K10. Find the Dividend yield and capital gains yield and total yield or return? B. Tomorrow Investments Ltd. just paid a divided of K2.00 in 2019 and the dividend is expected to grow at 15% for the next 3years and thereafter decline to 10%. The required rate of return on the stock is 18%. Find the value of the stock. C. The Blue Dog Company has common stock outstanding that has a current price of $20 per share and a $0.5 dividend. Blue Dog’s dividends are expected to grow at a rate of 3% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market premium is 5%. The beta on Blue Dog’s stock is 1.2. What is the cost of equity for Blue Dog using the dividend valuation model and What is the cost of equity for Blue Dog using the capital asset pricing? model? [

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
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QUESTION FIVE A. A stock originally sold for K25 per share and ten years later, now sells for K40.The dividend last paid was K10. Find the Dividend yield and capital gains yield and total yield or return? B. Tomorrow Investments Ltd. just paid a divided of K2.00 in 2019 and the dividend is expected to grow at 15% for the next 3years and thereafter decline to 10%. The required rate of return on the stock is 18%. Find the value of the stock. C. The Blue Dog Company has common stock outstanding that has a current price of $20 per share and a $0.5 dividend. Blue Dog’s dividends are expected to grow at a rate of 3% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market premium is 5%. The beta on Blue Dog’s stock is 1.2. What is the cost of equity for Blue Dog using the dividend valuation model and What is the cost of equity for Blue Dog using the capital asset pricing? model? [
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