Question: We have 4 stocks (A, B, C and D) with a required rate of return of 17%. The most recent dividend paid on A ,
We have 4 stocks (A, B, C and D) with a required rate of return of 17%. The most recent dividend paid on A , B and C is $4.50 per share. Stock A, B, and C are expected to maintain constant growth rates in dividends for foreseeable future of 10%, 0%, and 25% per year, respectively. Stock D is a growth stock that will increase in its dividend by 20% for the next two years and then maintain a constant 12% growth rate thereafter. What is the dividend yield for these stocks? What is the expected capital gains yield? Discuss the relationship between the various returns that you find for each of these stocks.
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