Question

Anle Corporation has a current stock price of $19.88 and is expected to pay a dividend of $O.80 in one year. Its expected stock price right after paying that dividencd is $21.65 a. What is Anle's equity cost of capital? b. How much of Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital gain? a. What is Anie's equity cost of capital? Anie's equity cost of capital is 12047% (Round to two decimal places.)

Answer 1

Stock price today	19.88
Dividend in 1 year	0.8
Stock price at Y1	21.65
Cost of capital=	((21.65-19.88)+0.80)/19.88
Cost of capital=	12.93%
Dividend yield	0.80/19.88
	4.02%
Cap gain yield	((21.65-19.88)/19.88
	8.90%