# Question: Ibis Company is expected to pay a 1 50 dividend next

Ibis Company is expected to pay a $1.50 dividend next year. Dividends are expected to grow at 3 percent forever and the required rate of return is 7 percent.

a. What is the price of Ibis today?

b. What is the expected dividend yield?

c. What is the expected capital gains yield?

d. In one year, immediately after the dividend is paid,

i. What is the price of the stock?

ii. What was the one-year holding period return?

iii. Looking forward one year, what are the expected dividend and capital gains yields?

e. In year 10, immediately after the dividend is paid,

i. What is the price of the stock?

ii. What was the one-year holding period return (year 9 to 10)?

iii. Looking forward one year, what are the expected dividend and capital gains yields?

a. What is the price of Ibis today?

b. What is the expected dividend yield?

c. What is the expected capital gains yield?

d. In one year, immediately after the dividend is paid,

i. What is the price of the stock?

ii. What was the one-year holding period return?

iii. Looking forward one year, what are the expected dividend and capital gains yields?

e. In year 10, immediately after the dividend is paid,

i. What is the price of the stock?

ii. What was the one-year holding period return (year 9 to 10)?

iii. Looking forward one year, what are the expected dividend and capital gains yields?

**View Solution:**## Answer to relevant Questions

Parker Imports Ltd. is expected to pay a $2.00 dividend in one year. The required rate of return is 9 percent. The firm uses a dividend payout ratio of 25 percent. Calculate the leading P/E ratio in the following cases:a. ...Peele Clothiers Ltd.'s current dividend is $3.60. Dividends are expected to grow by 9 percent for years 1 to 3, 6 percent for years 4 to 7, and 2 percent thereafter. The required rate of return on the stock is 12 percent. ...Next year Dillon Mechanical Inc.'s EPS is expected to be $2. The firm is not expected to pay any dividends for the next four years. In year 5, a dividend of $1 is expected and subsequent dividends are expected to grow at 5 ...Larch Foods Inc.'s current dividend is $4.00. Dividends are expected to decline by 4 percent per year for the next three years, and then remain constant thereafter. The required rate of return for this type of company is 15 ...1. Calculate the capital gain return for a stock that was purchased at $25 one year ago and is now worth $26. It paid four quarterly dividends of $1 per share each throughout the year.a. 4 percentb. 16 percentc. 20 percentd. ...Post your question