If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $54, then what is the stock's expected dividend yield for the coming year?

4.31%

Explanation:

The computation of the expected dividend yield is shown below:

As we know that

Dividend yield = (Annual dividend : Market price) * 100

where,

Annual dividend would be

= $2.25 + $2.25 * 3.5%

= $2.25 + 0.07875

= $2.32875 per share

And, the market price is $54 per share

So, the expected dividend yield is

= ($2.32875 per share : $54 per share) * 100

= 4.31%