unit 5 question 18

Taussig Technologies Corporation (TTC) has been growing at a rate of 12% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to g_n = 7%.

1. If D₀ = $2.80 and r_s = 10%, what is TTC's stock worth today? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is its expected dividend yield at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. % What is its capital gains yields at this time, that is, during Year 1? Do not round intermediate calculations. Round your answer to two decimal places. %

b. What will TTC's dividend and capital gains yields be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth; the calculations are very easy.) Round your answers to two decimal places. Dividend yield: % Capital gains yield: %