What is the price of happy holiday touring company shares

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Reference no: EM132578379

The Happy Holiday Touring Company has developed a novel way of selling vacation packages. The company would like to promote this idea over the next few years before the competition creates their own vacation clubs, however there is some concern regarding a projected recession and the effect this may have on their share price.

Earnings and dividends are expected to grow at a rate of 1% in the first year, -2% in the second year and at a constant rate of 3% thereafter. The required rate of return for this industry is 5%. Last year, the company paid a dividend of $1.10 per share.

Required:

Question (1) What is the price of Happy Holiday Touring Company shares today?

Question (2) What is the share price (estimated) at the end of the first year?

Question (3) What dividend yield, capital gains yield, and total yield, should an investor in this company expect for the first year?

Reference no: EM132578379

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