Suppose that Do = $1.00 and the stock's last closing price is $14.71. It is expected that earnings and dividends will grow at a constant rate of g= 3.00% 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 7, = 10.00%. The dividend received in period 1 is D = $1.00 x (1+0.0300) = $1.03 and the estimated intrinsic value in the same period is based on the constant growth model: P = P Ta-g Using the same logic, compute the dividends, prices, and the present value of each of the dividends at the end of each period. Dividend (Dollars) $1.00 Price (Dollars) $14.71 PV of dividend at 10.00% (Dollars) 1.03 Period 0 1 2 3 4 5 The dividend yield for period 1 is and it will The capital gain yield expected during period 1 is and it will each period. each period. If it is forecasted that the total return equals 10.00% for the next 5 years, what is the forecasted total return out to infinity?

Suppose that D0=$1.00 and the stock's last dosing price is $14.71. It is expected that earnings and dividends will grow at a constant rate of g=3.00% 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,=10.00%. The dividend received in period 1 is D1=$1.00(1+0.0300)=$1.03 and the estimated intrinsic value in the same period is based on the constant growth model: P1=r29D3. Using the same logic, compute the dividends, prices, and the present value of each of the dividends ar the end of each period. The dividend yeld for period 1 is and it will each period. The copital gain yield expected during penod 1 is and it will each period. If it is forecasted that the total return equals 10.00% for the next 5 years, what is the forecasted total return out to infinity