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    What is the stock's value now? What is its expected dividend yield and its capital gains yield in year 1 and year 4?

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    1. A company's stock is selling at $30.29 (currently). Suppose the company is expected to experience zero growth during the first 3 years and then to resume its steady-state growth of 6% in the 4th year. What is the stock's value now? What is its expected dividend yield and its capital gains yield in year 1 and year 4?

    2.Assume that the company's earnings and dividends are expected to decline by a constant 6% per year, that is g= -6%. Why would anyone be willing to buy such a stock and what price should it sell at? What would be the dividend yield and capital gains yield each year?

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    Solution Preview

    1. A company's stock is selling at $30.29 (currently). Suppose the company is expected to experience zero growth during the first 3 years and then to resume its steady-state growth of 6% in the 4th year. What is the stock's value now? What is its expected dividend yield and its capital gains ...

    Solution Summary

    The expert examines stock values and expected dividend yields.

    $2.19

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