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What is the expected capital gains yield in the first year

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Reference no: EM132978631

Problem - Firm B has just paid a $15 annual dividend on its common stock in a single annual installment, and it is expected to pay the following dividends over the next two years: $18 and $23. Afterwards, the firm decides to maintain a constant 5% growth rate in dividends per year forever.

a. If the appropriate rate of return on the stock is 10%, compounded semi-annually, what is the current share price?

b. What is the dividend yield of the stock in the first year?

c. What is the expected capital gains yield in the first year?

Reference no: EM132978631

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