What is total yield-dividend yield and capital gain yield

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The Rapid Inc. is a fast growing company. It is expected to grow by 20% for the next 3 years after which it will grow moderately at the rate of 6% annually for the foreseeable future. The company is expected to pay a dividend of $1 per share next year. Assuming that the required rate of return is 16% for such stock:

a. What is the maximum price you are willing to pay for this rapid stock today? What about a year from now?

b. What is the total yield, dividend yield and capital gain yield for this company today?

c. What will be the price of the stock if the company fails to grow the abnormal rate at all, but grows instead at the moderate rate of 6% per year for the foreseeable future?

Reference no: EM131012413

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