5. Expected returns, dividends, and growth The constant growth valuation formula is as follows: Po D T. 9 Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.25 at the end of the year. Its dividend is expected to grow at a constant rate of 9.00% per year. If Walter's stock currently trades for $27.00 per share, then the expected rate of return on the stock is Walter's dividend is expected to grow at a constant growth rate of 9.00% per year. What do you expect to happen to Walter's expected dividend yield in the future? It will increase. It will stay the same. It will decrease