4. (10 marks) A company will pay a $1 dividend per share in a year's time....

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4. (10 marks) A company will pay a $1 dividend per share in a years time. The dividend in two years will be $2 per share, an

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Answer 1

Answer #1

1.
=1/1.12+2/1.12^2+2*1.05/(12%-5%)*1/1.12^2=26.40306122

2.
=2/1.12^1+2*1.05/(12%-5%)*1/1.12^1=28.57142857

3.
Dividend yield=1/26.40306122=3.7874%

Capital gains yield=28.57142857/26.40306122-1=8.2126%

Dividend yield+Capital gains yield=12%

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Answer 2

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