Evaluate what is the expected capital gains yield

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Consider four different stocks, A, B, C and D, all have a required return of 15 percent and a most recent dividend of €5 per share. Stocks A,B, and C are expected to maintain constant growth rates in dividends for the future of 5 percent, 0 percent, and -5 percent per year, respectively.

Stock D is a growth stock that will increase its dividend by 20 percent for the next 3 years and then maintain a constant 6 percent growth rate thereafter.

Question 1: What is the dividend yield for each of these four stocks? What is the expected capital gains yield?

Reference no: EM132995445

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