/quiz?quiz action-takeQuiz8quiz, probGuid ONAPCOA801010000003a2420900600008ctbx-
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/quiz?quiz action-takeQuiz8quiz, probGuid ONAPCOA801010000003a2420900600008ctbx-gerard-becker-0003& Portman Industries just paid a dividend of $2.16 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. 1 Investors expect a required rate of return of 13.60% Term Value on Portman's stock. [ Dividends one year from now (DI) Value of Portman's stock at the end of the nonconstant dividend- growth period Portman's stock price Assuming that the market is in equilibrium, use the information just given to complete the table. What is the expected dividend yield for Portman's stock today? O 10.40% o 11.45% O 8.32% 10.08% Now let's apoly the resuits of your celculations to the tollowing situationExplanation / Answer
D0 = 2.16
D1 = 2.16 * 1.16
D1 = 2.51
D2 = 2.51 * 1.032 = 2.59
P1 = D2/ (Required Rate - Growth Rate)
P1 = 2.59/ (13.6% - 3.2%)
P1 = 24.86
P0 = (2.51 + 24.86)/ (1.136)
P0 = 24.09
Expected Dividend Yield = D1/ P0
Expected Dividend Yield = 2.51/ 24.09
Expected Dividend Yield = 10.40%
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