Increasing annual dividend-decreasing the growth rate

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Reference no: EM131026262

Company A is planning on increasing its annual dividend by 15% a year for the next 4 years and then decreasing the growth rate to 3.5% per year afterwards. The company just paid its annual dividend in the amount of $0.2 per share. Suppose the required rate of return is 15.5%. What is the dividend yield and capital gains yield today?

A. Dividend yield is 0.5%; capital gains yield is 15%.

B. Dividend yield is 12%; capital gains yield is 3.5%.

C. Dividend yield is 11.5%; capital gains yield is 3.5%.

D. Dividend yield is 9.25%; capital gains yield is 6.25%.

E. Dividend yield is 10%; capital gains yield is 5%.

Reference no: EM131026262

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