question archive Suppose you know a company's stock currently sells for $47 per share and the required return on the stock is 11 percent
Suppose you know a company's stock currently sells for $47 per share and the required return on the stock is 11 percent
Subject:FinancePrice:2.87 Bought7
Suppose you know a company's stock currently sells for $47 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, the current dividend is $
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
Dividend yield = 1/2*(.11) = .055
= Capital gains yield D1 = .055*(47)
= 2.59 (next year's dividend) D1
= D0*(1 + g) 2.59
= D0*(1 + .055) D0 = 2.59 / 1.055
= 2.45
