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kotegsom [21]
3 years ago
13

Credenza Industries is expected to pay a dividend of $1.70 at the end of the coming year. It is expected to sell for $62 at the

end of the year. If its equity cost of capital is 9%, what is the expected capital gain from the sale of this stock at the end of the coming year
Business
1 answer:
Brrunno [24]3 years ago
6 0

$3.56 is the capital gain

<u>Explanation:</u>

<u>Credenze industries </u>

The Dividend = 1.70 , Cost of capital = 9% , Selling price =62 , calculation of Expected capital gain =?

<u>In order to calculate the Present market price (PM) , </u>

Let the PM (Present market value) = x

The Cost of equity = the change in market price + dividend

9 \% \text { of } x=(62-x)+1.70

=> X = $ 58.44 .

Therefore, the Capital Gain that has been gained is = $ 3.56

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