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Sagot :
Answer:
a.
Last Dividend, D0 = $3.12
Growth Rate, g = 6.50%
Required Return, rs = 16.25%
[tex]D1 = D0 \times(1 + g)\\D1 = $3.12\times1.065\\[/tex]
D1 =$ 3.3228
Intrinsic Value, P0 = D1 / (rs - g)
Intrinsic Value, P0 = $3.3228 / (0.1625 - 0.0650)
Intrinsic Value, P0 = $34.08
b.
The constant growth model can be used if a stock’s expected constant growth rate is less than its required return.
c.
Dividend Yield = D1 / P0
Dividend Yield = $3.3228 / $34.08
Dividend Yield = 0.0975 or 9.75%
d.
Price in 1 year, P1 = P0 * (1 + g)
Price in 1 year, P1 = $34.08 * 1.065
Price in 1 year, P1 = $36.30
e.
Capital Gain Yield = (P1 - P0) / P0
Capital Gain Yield = ($36.30 - $34.08) / $34.08
Capital Gain Yield = 0.0650 or 6.50%
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