Question
A stock pays annual dividends. It just paid a dividend of $2. The growth rate in the dividend is 3% pa. You estimate that the
A stock pays annual dividends. It just paid a dividend of $2. The growth rate in the dividend is 3% pa. You estimate that the stock's required return is 9% pa. Both the discount rate and growth rate are given as effective annual rates. Which of the following statements is NOT correct? a. Dividend growth rate is equal to the long term expected dividend yield. b. The dividend at time t=3 will be $2.185 c. The capital return of the stock is 3% d. The share price at time t=0 is $34.33 e. Total return of the stock is equal to the company's long term cost of equity.
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