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Sedbober [7]
3 years ago
6

This morning you purchased a stock that just paid an annual dividend of $3.10 per share. You require a return of 9.2 percent and

the dividend will increase at an annual growth rate of 4 percent. If you sell this stock in three years, what will your capital gain be?
Business
1 answer:
sergiy2304 [10]3 years ago
6 0

Answer:

$2.48

Explanation:

This morining a stock was purchased.

The stock just paid an annual dividend of $3.10 per share

A return of 9.2% is required

= 9.2/100

= 0.092

The growth rate is 4%

= 4/100

= 0.04

The first step is to calculate today's price

= D1/(r-g)

=3.10× 1+0.04/0.092-0.04

= 3.10×1.04/0.092-0.04

= 3.224/0.052

= $62

The price at the end of year 3 can be calculated as follows

= today's price × (1+g)

= 62×(1+0.04)

= 62×1.04

= $64.48

Therefore, the capital gain can be calculated as follows

Price at the end of year 3-today's price

= $64.48-$62

= $2.48

Hence the capital gain is $2.48

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Answer:

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Explanation:

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Read 2 more answers
Bedeker, Inc., has an issue of preferred stock outstanding that pays a $3.35 dividend every year in perpetuity. If this issue cu
kolezko [41]

Answer:

k_{p} = 3.72%

Explanation:

We know,

The price of a preferred stock is calculated by dividing the dividends from preferred stock by the required rate of return of preference share. Assuming the stock is growing constantly.

The formula to calculate -

Price of preferred stock = Dividend from preferred stock ÷ required rate of return

Given,

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Hence, k_{p} = 3.72%

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3 years ago
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