Question
Summer Sunshine is expected pay a dividend of 1.40 per share at the end of this year (year 1) and a 1.50 per share at
Summer Sunshine is expected pay a dividend of 1.40 per share at the end of this year (year 1) and a 1.50 per share at the end of the second year. You expect Summer Sunshine's stock price to be 25.00 at the end of two years. Summer Sunshine's equity cost of capital is 10%. Suppose you plan on purchasing Summer Sunshine stock in one year, right after the 1.40 dividend is paid. You then plan on selling your stock at the end of year two, right after the 1.50 dividend is paid. The total return that you will receive on your investment is closest to:
a. 3.73% b. 6.22% c. 9.95% d. 10.25%
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