Leonard Co is expected to pay a dividend of $2.75. If this dividend is expected to...
Homework Answers
| A. | Share price is the present value of future dividends which is calculated as follows: | ||||||
| Share price | = | D1/(Ke-g) | Where, | ||||
| = | 2.75/(0.12-0.03) | D1 | = | $ 2.75 | |||
| = | $ 30.56 | Ke | = | 12% | |||
| g | = | 3% | |||||
| B. | Dividend yield | = | Annual dividend | / | Current Price | ||
| = | $ 2.75 | / | $ 30.56 | ||||
| = | 9.00% | ||||||
| C. | Capital Gain Yield | = | Required return | - | Dividend yield | ||
| = | 12% | - | 9.00% | ||||
| = | 3.00% | ||||||
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