What would capital gains and dividend yield be for year

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Reference no: EM131026256

You have been asked to value a stock that will not pay a dividend until three years from now. At that time you estimate the dividend will be $1.40. You estimate that it will grow by 10% for the two following years and at 5% thereafter. Solve the following using Excel where possible.

1. What is the value of the stock if its beta is 1.2, the risk-free rate is 2% and the risk premium on the market is 5%?

2. What would the value of the stock be at the end of the first year if rates had not changed?

3. What would the capital gains and the dividend yield be for the year?

Reference no: EM131026256

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