1. Peter Brothers Inc. is expected to pay a $0.50 per share dividend at the end of the year. The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock is 15%. What is the value per share of the company's stock? Also estimate the dividend yield and the capital gains yield over the first year. 6.5 7% 9 = 1%, r = 15% J D 0.5 pv= = = 6.25 r-g 0.15-0.07 Div. Yield = DIV = = price 6.25 capital gain yield 0.5 8% dividend yield 6.6875-6.25: 6.25 = 7% capital gain yield Capital Gain Yield = P - Po check: 1%. + 8% = 15%