Chapter 13, Problem 18P

Summary Introduction

To determine: How the market values and expected returns are related if firms have different expected returns and the relation between the dividend yields and expected returns.

Introduction:

Expected return is a process of estimating the profits and losses that an investor earns through the expected rate of returns. The term dividends refer to the portion of proceeds of an organization which is circulated by the organization among its investors. It is the remuneration of the investors for the investments made by them in the shares of the organization.