Consider four different stocks, all of which have a required return of 18 percent and a most recent dividend of $3.55 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 11.5 percent, O percent, and -6 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 13.5 percent growth rate, thereafter. a. What is the dividend yield for each of these four stocks? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the expected capital gains yield for each of these four stocks? Note: A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Stock W dividend yield % Stock X dividend yield % Stock Y dividend yield % Stock Z dividend yield % b. Stock W capital gains yield % Stock X capital gains yield % Stock Y capital gains yield % Stock Z capital gains yield %

Consider four different stocks, all of which have a required return of 18 percent and a most recent dividend of $3.55 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 11.5 percent, O percent, and -6 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 13.5 percent growth rate, thereafter. a. What is the dividend yield for each of these four stocks? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the expected capital gains yield for each of these four stocks? Note: A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Stock W dividend yield % Stock X dividend yield % Stock Y dividend yield % Stock Z dividend yield % b. Stock W capital gains yield % Stock X capital gains yield % Stock Y capital gains yield % Stock Z capital gains yield %

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Description: Consider four different stocks, all of which have a required return of 18 percentand a most recent dividend of $3.55 per share. Stocks W, X, and Y are expected tomaintain constant growth rates in dividends for the foreseeable future of 11.5percent,

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 18MC

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