Question: Ultimate Electric, Inc. has just developed a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As
Ultimate Electric, Inc. has just developed a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, Ultimate is expected to experience a 15 percent annual growth rate for the next five years. When the five-year period ends, other firms will have developed comparable technology, and Ultimates growth rate will slow to 5 percent per year indefinitely. Stockholders require a return of 12 percent on Ultimates stock. The firms most recent annual dividend (D0), which was paid yesterday, was $1.75 per share.
Calculate the dividend yield, /P0, the expected capital gains yield, and the expected total return (dividend yield plus capital gains yield) for this year. Calculate these same three yields for Year 5.
I think the dividend yield is 5.10% for this year and 11.75% for year 5. I need help with the expected capital gains yield, and the expected total return (dividend yield plus capital gains yield) for this year and year five.
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