Question
AAA Corp. recently paid an annual $15 per share dividend. From the recently approved patent, this companys net profits will grow at 20% in the
AAA Corp. recently paid an annual $15 per share dividend. From the recently
approved patent, this companys net profits will grow at 20% in the next 2 years, and
at 5% in the third year and beyond due to the expiration of the patent. The required return
to this companys shareholders is at 10%.
(1) Calculate the intrinsic value of Stony AAAs stock per share.
(2) Calculate the dividend yield and the capital gains yield for the first year (t=0).
Round up to the first decimal point if your answer is expressed in percentage (%)
(or up to the third decimal point if written infraction).
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