Suppose that $D_0=$$$1\mathrm{.}00$ and the stock's last closing price is $$18\mathrm{.}73.$ It is expected that earnings and dividends will grow at

a constant rate of $g=3\mathrm{.}50\%$ per year and that the stock's price will grow at this same rate. Let us assume that the stock is

fairly priced, that is$,$ it is in equilibrium, and the most appropriate required rate of return is $r_s=9\mathrm{.}00\%.$

The dividend received in period $1$ is $D_1=$$$1\mathrm{.}00(1+0\mathrm{.}0350)=$$$1\mathrm{.}04$ and the estimated intrinsic value in the same

period is based on the constant growth model: widehat$(P_1)=\frac{D_2}{r_s-g}.$

Using the same logic, compute the dividends, prices, and the present value of each of the dividends at the end of each

period.

The dividend yield for period $1$ is

and it will

each period.

The capital gain yield expected during period $1$ is

and it will

each period.

If it is forecasted that the total return equals $9\mathrm{.}00\%$ for the next $5$ years, what is the forecasted total return out to infinity?

$3\mathrm{.}50\%$

$5\mathrm{.}50\%$

$9\mathrm{.}00\%$

$12\mathrm{.}50\%$