Dividend Yield & Capital Gains Yield for an Investor in the Club
Not what you're looking for?
The club auto parts company has recently organized. It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory. However, club will grow at an annual rate of 5 percent in the third year and beginning with the fourth year, should attain a 10 percent growth rate which will sustain thereafter. The first dividend (D1) to be paid at the end of the 1st year is expected to be $0.50 per share. Investors require a 15 percent rate of return on club stock.
Q: What dividend yield and capital gains yield should an investor in the Club expect for the first year?
Purchase this Solution
Solution Summary
The solution determines the dividend yield and the capital gains yield.
Solution Preview
Information given:
1st two years, g = 0
Year 5, g= 5%
Year 6 >, g = 10%
D1 = $ 0.50
k = 15%
Dividend Yield = Annual Dividends Per Share
----------------------------
Price Per Share
The constant growth model:(we need this to calculate the ...
Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance
These questions will test you on your knowledge of finance.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)