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Investors expect Bae Corporation to pay a dividend of D1 = $1.50 and to grow at a constant rate of 7% per year. The stock

Investors expect Bae Corporation to pay a dividend of D1 = $1.50 and to grow at a constant rate of 7% per year. The stock sells at a price of $25. What is Bae's expected capital gains yield?

a. 4.0%

b. 5.0%

c. 6.0%

d. 7.0%

e. 8.0%

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