The next dividend payment by bob, Inc., will be $2.16 per share. The dividends a
ID: 2651577 • Letter: T
Question
The next dividend payment by bob, Inc., will be $2.16 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. bob stock currently sells for $44 per share.
What is the dividend yield? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
The next dividend payment by bob, Inc., will be $2.16 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. bob stock currently sells for $44 per share.
Explanation / Answer
Answer
1)
Particulars
Amount
Dividend per share (D1)
a
2.16
Stock per share price (P0)
b
44
Dividend yield % (a/b)*100
4.91
Answer : Dividend yield is 4.91%
2)
Particulars
Amount
Dividend per share (D1)
a
2.16
Stock per share price (P0)
b
44
(D1/P0)
c
0.0491
Growth rate
d
0.05
Cost of capital (ke) % ( c+d)*100
e
9.91
Particulars
Amount
Dividend per share for year 1(D1)
a
2.16
Growth rate (5%)
b
1.05
Dividend per share for year 2(D2) (a*b)
c
2.268
Cost of capital (ke) %
d
0.0991
Growth rate (g)
e
0.05
(ke-g)
f
0.0491
Stock per share price at year 1 end (P1) (c/f)
g
46.19
Stock per share price (P0)
h
44
Capital gain (P1 - P0)
i
2.19
Capital gain yield (i/h)*100
4.98
Answer : Capital gain yield is 4.98%
Particulars
Amount
Dividend per share (D1)
a
2.16
Stock per share price (P0)
b
44
Dividend yield % (a/b)*100
4.91
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