Question

please help d, e and f

--- P 1 03 215 --- (d) Assume that DVL Company is a consta at DVL Company is a constant growth company which paid a dividend of Tshs 50 vesterday in the Sos 60 yesterday (Do =Tshs 60) and dividend is expected to grow at a rate of 14% per year forever. (i) What is the expected value of the stock a year from now? ) [6 marks year? the expected dividend yield and capital gains yield in the first . . (3+3 = 6 sharks! Teh If the stock of DVL Company is currently selling for Tshs 1,400, what is the expected rate of return on the stock? [6 marks! (6 Outline the main economic variables that determine the stock prices. CamScannerid emplatebing {nbestrid pendant (10 marks]

sorry, the required rate of return is 20.2% as calculated from the preceeded question

where the risk free rate is 9%

market risk premium is 8%

beta is 1.4

Answer 1

d) i) The expected value of a stock 1 year from now = D₁/(r-g)

D₁ = D₀ * (1+growth rate) = 60*1.14

   = $68.4

Expected value = 68.4/(0.202-0.14) = 68.4/0.062 = $1,103.23 Answer

ii) Dividend yield = (Dividend/Expected Value)*100 = (68.4/1103.23)*100 = 6.2% Answer

Expected value of stock now = D₁/(r-g) = 60/(0.202-0.14) = 60/0.062 = $967.74

Capital gains yield = [(Expected value of year 1 - Value now)/Value now]*100 = [(1103.23-967.74)/967.74]*100

= [135.49/967.74]*100

= 0.14*100 = 14% Answer

Please upvote if this helps.