If D1 = $2.00, g (which is constant) = 6%, and P0 = $40, what is the stock's expected capital gains yield?
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5.2% |
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5.4% |
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6.0% |
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5.8% |
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5.6% |
| required rate = (Next year dividend/Price today )+growth rate | |||||
| =(2/40)+6% | |||||
| 11.00% | |||||
| Dividend yield = | =2/40 | 5.00% | |||
| Capital gain yield = 11%-5% = | 6.00% | ||||
| Therefore answer is option 6% | |||||
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