Determine what is the expected capital gains yield

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Problem 1: Consider four different stocks, all of which have a required return of 17% and a most recent dividend of $4.50 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10%, 0%, and 25% per year, respectively. Stock Z is a growth stock that will increase its dividend by 20% for the next two years and then maintain a constant 12% growth rate thereafter. What is the dividend yield for each of these four stocks? What is the expected capital gains yield? Discuss the relationship between the various returns that you find for each of these stocks.

Reference no: EM132961935

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