You buy a share of Damanpour Corporation stock for $21.40. You expect it to pay dividends of

Question:

You buy a share of Damanpour Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively. You also expect to sell the stock at a price of $26.22 at the end of three years.

a. Calculate the growth rate in dividends.

b. Calculate the expected dividend yield.

c. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to determine the expected total rate of return. What is this stock’s expected total rate of return?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...