Consider four different stocks, all of which have a required return of 18 percent and a...

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Finance

Consider four different stocks, all of which have a requiredreturn of 18 percent and a most recent dividend of $3.55 per share.Stocks W, X, and Y are expected to maintain constant growth ratesin dividends for the foreseeable future of 11.5 percent, 0 percent,and –6 percent per year, respectively. Stock Z is a growth stockthat will increase its dividend by 20 percent for the next twoyears and then maintain a constant 13.5 percent growth rate,thereafter.

What is the dividend yield for each of these four stocks?(Do not round intermediate calculations and enter youranswers as a percent rounded to 2 decimal places, e.g.,32.16.)

Dividendyield
StockW %
Stock X %
Stock Y %
Stock Z %

What is the expected capital gains yield for each of these fourstocks? (A negative answer should be indicated by a minussign. Leave no cells blank - be certain to enter "0" whereverrequired. Do not round intermediate calculations and enter youranswers as a percent rounded to 2 decimal places, e.g.,32.16.)

Capital
gains yield
StockW %
Stock X %
Stock Y %
Stock Z %

Answer & Explanation Solved by verified expert

3.8 Ratings (586 Votes)

For calculating capital yield and dividend yield we will first calculate stock price The value of a constant growth stock can be determined using the following equation POD01gRg P0 the See Answer

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Consider four different stocks, all of which have a requiredreturn of 18 percent and a most recent dividend of $3.55 per share.Stocks W, X, and Y are expected to maintain constant growth ratesin dividends for the foreseeable future of 11.5 percent, 0 percent,and –6 percent per year, respectively. Stock Z is a growth stockthat will increase its dividend by 20 percent for the next twoyears and then maintain a constant 13.5 percent growth rate,thereafter. What is the dividend yield for each of these four stocks?(Do not round intermediate calculations and enter youranswers as a percent rounded to 2 decimal places, e.g.,32.16.) DividendyieldStockW%Stock X%Stock Y%Stock Z% What is the expected capital gains yield for each of these fourstocks? (A negative answer should be indicated by a minussign. Leave no cells blank - be certain to enter "0" whereverrequired. Do not round intermediate calculations and enter youranswers as a percent rounded to 2 decimal places, e.g.,32.16.) Capitalgains yieldStockW%Stock X%Stock Y%Stock Z%