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16 August, 05:52

The next dividend payment by Savitz, Inc., will be $2.34 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. The stock currently sells for $37 per share. a. What is the dividend yield?

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  1. 16 August, 07:16
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    Market value of stock MV=$37

    Dividend D1=$2.34

    Growth rate g=4.5%

    Dividend yield Ke=?

    Formula;

    MV=D1 / (Ke-g)

    37=2.34 / (Ke-.045)

    37Ke-1.665=2.34

    Ke = (2.34+1.665) / 37

    Ke=10.8%
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