Question
Q.1:- Tesla Tech. Co., just paid dividend of $1.60 per share. The dividend is expected to grow at a supernormal growth rate of 20% for
Q.1:- Tesla Tech. Co., just paid dividend of $1.60 per share. The dividend is expected to grow at a supernormal growth rate of 20% for the next two years. After that company is expected to reduce its dividend growth rate by 4% for the next four years. From that point onward company will make a progress at a rate of 5% forever. a. Find the Intrinsic value of stock today if the required rate of return is 10%. What is the expected Dividend yield and capital Gain yield at this time? b. Now assume that the supernormal growth is expected to last for 5 years instead of 2 years. How would this affect its intrinsic price, Capital Gain yield and dividend yield. c. What will be the dividend yield and capital gains yield be once its period of supernormal growth ends? d. As an investor what you can infer from the relationship over time between dividend yield and capital gains yield?
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