Question
Assume a corporation has just paid a dividend of $ 1.79 per share. The dividend is expected to grow at a rate of 2.8% per
Assume a corporation has just paid a dividend of $ 1.79 per share. The dividend is expected to grow at a rate of 2.8% per year forever, and the discount rate is 8.4%.
What is the dividend yield of this stock?
Hint 1: what do the Dividend Yield and Capital Gains Yield add up to?
Hint 2: if the dividend grows at the same rate forever, what is equal to the Capital Gains Yield?
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Continuous Time Finance
Authors: Robert C. Merton
1st Edition
0631185089, 978-0631185086
