QUESTION 4

Q1 Mr Salman is a stock trader and he buy stocks that pays him high returns. Recently he bought a stock that pay $6 as a dividend per share. The company has promised to increase the dividend by 8% in each of next three years. Company has also forecasted that the stock will reach the buying price of Rs 94 per share in three years. If the investors required return is 12%. Calculate the following.

Write answer of part B only. Only write numeric ans no need to write RS.

Dividend in third year [2 marks]

Present value of the stock that Mr Salman has bought [2 marks]

Dividend yield [2 marks]

Capital gain yield [2 marks