why we know that

Problem Stock Valuation [L01 ] Suppose you know that a company's stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? Step-by-step solution Collapse All Step 1/5 Dividend per Share The amount of dividend earned for one share is referred to as dividend per share. Step 2/5 Capital gains yield The constant growth rate of dividend is referred to as capital gains yield. Step 3/5 Determine the current dividend per share, Do, if current price, Po is $63, and rate of return, R is 0.105. Step 1: Compute capital gains yield, g. Capital gains yield - Rate of return - Why we know that ? 10.5% 2 g-5.25% or 0.0525