What is your percent capital gain on this investment

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Reference no: EM131882815

1. You expect GDL to pay a dividend of $1 in one year, $4 in two years and $5 in 3 years. After that, you think dividends will grow at a constant rate of 5%. You require a return of 13% to invest in GDL. How much would you pay for a share of the company today?

2. You buy GBT for $56. One year later, you collect a dividend of $3 and sell the share for $51. What is your percent capital gain on this investment?

3. JBT company just paid a dividend of $2. Dividends will grow at a constant rate of 3% forever, and the required return for the company is 13%. Suppose you buy the stock at these conditions today, but one year later investors suddenly expect the growth rate in the stock to be 5%. What is your rate of return on this investment if you sell the shares one year later?

Reference no: EM131882815

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