Anle Corporation has a current stock price of $17.33 and is expected to pay a di

Question

Anle Corporation has a current stock price of $17.33 and is expected to pay a dividend of $1.05 in one year. Its expected stock price right after paying that dividend is $19.50. a. What is Anle's equity cost of capital? a. What is Anle's equity cost of capital? Anie's equity cost of capital is 18.58%. (Round to two decimal places.) b. How much of Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital gain? The portion of Anle's equity cost of capital that is expected to be satisfied by the dividendyield is 96 Round to two decimal places.

Explanation / Answer

Part a

Equity cost of capital = Total Return

= (19.50-17.33+1.05)/17.33

= 3.22/17.33

= 18.58%

Part b

Dividend yield = 1.05/17.33

= 6.06%

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