Question

Krell Industries has a share price of $ 21.05 today. If Krell is expected to pay a dividend of $ 0.89 this year and its stock price is expected to grow to $ 24.36 at the end of the​ year, what is​ Krell's dividend yield and equity cost of​ capital?

Answer 1

Answer:

Krell's dividend yield and equity cost of​ capital are 4.23% and 19.95%

Explanation:

Dividend yield = expected dividend/price today

                         = $ 0.89/$ 21.05

                         = 4.23%

Equity cost of capital = (Ending share price - Initial price + Dividend per share) / Initial price * 100

                                   = [($24.36 - $21.05 + 0.89)/$21.05]*100

                                   = 19.95%

Therefore, Krell's dividend yield and equity cost of​ capital are 4.23% and 19.95%