common stock is selling for $50. The dividend paid next year will be $4.40 assum
ID: 2706382 • Letter: C
Question
common stock is selling for $50. The dividend paid next year will be $4.40 assuming a constant growth rate of 4.5%. What is the capital gains yield?
8%
8.8%
3.4%
4.5%
You are analyzing a project and have gathered the following data:
Year
Cash Flow
0
-$175,000
1
56,400
2
61,800
3
72,000
4
75,000
Required payback period
2.5 years
Required AAR
11.5%
Required return
14.5%
Based on the payback period of _____ years for this project, you should _____ the project.
a.
2.79; accept
b.
3.79; accept
c.
2.79; reject
8%
8.8%
3.4%
4.5%
common stock is selling for $50. The dividend paid next year will be $4.40 assuming a constant growth rate of 4.5%. What is the capital gains yield? You are analyzing a project and have gathered the following data: Based on the payback period of years for this project, you should the project.Explanation / Answer
Price today= $50
D1= $4.40
growth rate=4.5%.
P1= 50x1.045= 52.25%
What is the capital gains yield= 52.25-50/50= 4.5%
Required payback period= 2+[(175,000-56,400-61,800)/72000= 2.79 years
Therefore,
a. 2.79; accept is the correct answer.
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