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

Question

3 years ago

13

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

1 answer:

Brrunno [24] · Answer 1 · 2022-05-11T23:14:42+03:00

$3.56 is the capital gain

Explanation:

Credenze industries

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

In order to calculate the Present market price (PM) ,

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