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6 July, 10:09

The current price of Janco stock is $16.77. Dividends are expected to grow at 4.4% indefinitely and the most recent dividend paid yesterday was $3.93. What is the required rate of return, dividend yield, and capital gains yield on Janco's stock? (show your answers to 4 decimal places)

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  1. 6 July, 11:02
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    Required return = 28.87%

    Dividend yield = 24.4658%

    Capital gains yield = 4.4%

    Explanation:

    Required return = (D1/Current price) + Growth rate

    = (3.93*1.044) / 16.77+0.044

    =28.8658% (or 0.2887 approx)

    Dividend yield=Dividend for next period/Current price

    = (3.93*1.044) / 16.77

    =24.4658% (or 0.2447 approx)

    Capital gains yield=Growth Rate

    =4.4% (or 0.044)
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