Apple Inc. is expected to pay a dividend of $2.20 at the end of the coming year. It is expected to sell for $80 at the end of the year. If its equity cost of capital is 15%, what is the expected capital gain from the sale of this stock at the end of the coming year

Question

Mathematics

Julissa

22 December, 16:32

Apple Inc. is expected to pay a dividend of $2.20 at the end of the coming year. It is expected to sell for $80 at the end of the year. If its equity cost of capital is 15%, what is the expected capital gain from the sale of this stock at the end of the coming year

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Eleanor · Answer 1

Step-by-step explanation:

d1 = 2.20

p1 = 80

k - cost of capital, 15%

p0 = (p1+d1) / (1+k) = (2.20+80) / 1.15 = 82.20/1.15 = $71.48

Capital gain = 80 - 71.48 = 8.52

Capital gain in percentage = (80-71.48) / 71.48 = 11.92%