Question
ABC Company just paid a dividend (Do) of $1.10. Due to a new product being introduced to the market, ABC expects to achieve a supernormal
ABC Company just paid a dividend (Do) of $1.10. Due to a new product being introduced to the market, ABC expects to achieve a supernormal annual growth rate of 15% for the next four years. After that, growth is expected to return to the long-run constant rate of 8%. Investors require a 12% return on this stock.
Question 1 : What are the total return, expected dividend yield, and capital gains yield for the first year?
Question 2 : What are the total return, capital gains yield, and expected dividend yield for the fifth year?
Please show full working on a piece of paper. Thanks
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