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A stock is expected to pay a dividend of 0.50 in one quarter, and stock's expected price in one quarter is 15.00. The equity cost of capital is 6 percent per year. compounded annually.

a. What is the price of the stock today

b. What is the dividend yield?

c. What is the capital gain rate?

d. Suppose the 0.50 dollars dividend is exprected to continue indefinitely. Using the divident model. What would be the price of one share of stock?

e. If dividends are instead expected to grow at a tate of 2 percent per year. What would be the price of one share of stock?

Macroeconomics, Economics

  • Category:- Macroeconomics
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