2. Ricky Bobby Incorporated stock is selling for $16.48 this morning. Analysts b

Question

2. Ricky Bobby Incorporated stock is selling for $16.48 this morning. Analysts believe the stock will sell for $19.57 in one year. The stock is expected to pay a $0.58 dividend per share. What return will you earn if you purchase now?

3. CPJ Industries has a share price today of $22.39. If CPJ is expected to pay a dividend of $0.69 per share this coming year, and the stock price is expected to grow to $22.76 by the end of the year.

a. What is CPJ’s expected dividend yield?
b. What is CPJ’s expected capital gain yield?
c. What is CPJ’s expected total return?

Explanation / Answer

2)

Return from purchase:

= (Selling price + Dividend received ­– Purchase price) ÷ Purchase price

= ($19.57+$0.58-$16.48)/$19.48

= 22.27%

Hence, return from purchase is 22.27%

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