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Finance: Dividend Yield and the Equity Cost of Capital

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Questions:

1. Krell industries has a share price of $22.00 today. If Krell is expected to pay a dividend of $0.88 this year, and its stock price is expected to grow to $23.54 at the end of the year, what is Krell's dividend yield and equity cost of capital?

2. Dorpac Corporation has a dividend yield of 1.5%. Dorpac's equity cost of capital is 8%, and its dividends are expected to grow at a constant rate.
a. What Is the expected growth rate of Dorpac's dividends?
b. What is the expected growth rate of Dorpac's share price?

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Solution Summary

In just under 100 words, this solution is comprised of a detailed explanation to calculate the dividend yield and equity cost of capital. All required equations and variables are provided.

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1.
Dividend Yield = annual dividend per share/current stock's price per share
Dividend Yield = $0.88/$22.00
Dividend Yield = 4%

Growth ...

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