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If D1 $2, g (which is a constant) 6% and Po $40, what is ...

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If D1=$2, g (which is a constant) = 6% and Po=$40, what is the stock's expected capital gains yield for the coming year? If Do=$2.00, what is the stock's expected total return for the coming year?

D0=$2

G=6%

P0=$40

D1=$2.12

Dividend yield=5.3%
Customer: replied 9 years ago.
Reply to Dolly's Post: This answer is not one of my options.
For a constant growth stock, price grows at the same rate as as dividends: g

P1 = P0(1+g) = $40(1.06) = 42.4

Dividend yield = D1/P0 = $2/$40 = 0.05 = 5%

what is the stock's expected capital gains yield for the coming year
Capital gains yield = (P1 - P0)/P0 = (42.4 - 40)/40 = 0.06 = 6%


what is the stock's expected total return for the coming year
Total return = Dividend yield + Capital gains yield = 5% + 6% = 11%


Sk1llz, Mastermind
Category: Homework
Satisfied Customers: 2328
Experience: Mathematics, Statistics and Physics
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Customer: replied 9 years ago.
Stock's expected total reutrn for the coming year does not match up with my answer choices which are: a) 9.85, b)10.3%, c) 10.8%, d) 11.3% or e) 11.8%.
Can you give me the question again. I was just given: "If Do=$2.00, what is the stock's expected total return for the coming year?"
Customer: replied 9 years ago.
Reply to Sk1llz's Post: Do=$2, g (which is constant) = 6%, and Po=$40, what is the stock's expected total return for the coming year?
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