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An analyst is considering the dividend discount model for valuing Tasty foods. The dividend per share for 2011 is $1.05 and the EPS for 2011
An analyst is considering the dividend discount model for valuing Tasty foods. The dividend per share for 2011 is $1.05 and the EPS for 2011 is $4.57. The growth rate of dividends is 1.92%. The required rate of return is 5.40%. The analyst believes that the stock's current price of $16.30 is the fair value of the stock. The risk free rate is 1.70%. The equity risk premium is 10.20%.
If Alex is correct that the current price of tasty Foods is its fair value, what is expected capital gains yield on the stock?
A. 10.20%
B. 1.92%
C. 2.92%
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