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The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends

ID: 2651557 • Letter: T

Question

The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 3.75 percent, forever.

If the stock currently sells for $49.80 per share, what is the required return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

The next dividend payment by Wyatt, Inc., will be $3.05 per share. The dividends are anticipated to maintain a growth rate of 6.00 percent, forever. Assume the stock currently sells for $49.70 per share.

What is the dividend yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is the expected capital gains yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 3.75 percent, forever.

Explanation / Answer

The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 3.75 percent, forever.

Required:If the stock currently sells for $49.80 per share, what is the required return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Required return = Expected Dividend/Current Share Price + growth rate

Required return = 3.10/49.80 + 3.75%

Required return = 9.97%

The next dividend payment by Wyatt, Inc., will be $3.05 per share. The dividends are anticipated to maintain a growth rate of 6.00 percent, forever. Assume the stock currently sells for $49.70 per share.

Requirement 1:What is the dividend yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Dividend yield = Expected Dividend/Current Stock Price

Dividend yield = 3.05/49.70

Dividend yield = 6.14%

Requirement 2:What is the expected capital gains yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Capital gains yield = Constant growth rate

Capital gains yield = 6%

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