# Question

A broker offers to sell you shares of Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 5 percent per year. The stock’s required rate of return is 12 percent.

(a) What is the expected dollar dividend over the next three years?

(b) What is the current value of the stock and the expected stock price at the end of each of the next three years?

(c) What is the expected dividend yield and capital gains yield for each of the next three years?

(d) What is the expected total return for each of the next three years?

(e) How does the expected total return compare with the required rate of return on the stock? Does this make sense? Explain your answer?

(a) What is the expected dollar dividend over the next three years?

(b) What is the current value of the stock and the expected stock price at the end of each of the next three years?

(c) What is the expected dividend yield and capital gains yield for each of the next three years?

(d) What is the expected total return for each of the next three years?

(e) How does the expected total return compare with the required rate of return on the stock? Does this make sense? Explain your answer?

## Answer to relevant Questions

Draw a sketch of an IS-LM diagram. Compare two cases, one where the consumption function depends on the interest rate and the other where the consumption function does not depend on the interest rate. Compare the relative ...The Duncan Company has just completed a number of budgets for the coming year. The cost of goods manufactured schedule, the proforma income statement and the balance sheet still have to be completed. The following ...The file COSTEST 3 on the CD contains data on production runs at a manufacturing plant. There are two columns of data:y= COST is the total cost of the production runx= NUMBER is the number of items produced during that ...Determine the missing amount in each of thefollowing:If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for 10 years if the funds earn 8 ...Post your question

0