Estimate the required rate of return, Cost Accounting

a)     Company X is expected to maintain a constant 7% growth rate in their dividends, indefinitely. If the company has a dividend yield of 4%, what is the required return on their shares?

b)    Company Y shares currently sell for $60 per share. The required rate of return is 14% on their shares. If the company maintains a constant 7% growth rate in dividends, what was the most recent dividend paid per share?

c)     Company Z next dividend payment will be $3,50 per share. Dividends are expected to maintain an annual growth rate of 6% in perpetuity. If the company shares are presently selling at a market price of $55:

  • What is the required rate of return?
  • What is the dividend yield?
  • What is the expected capital gains yield?



Posted Date: 3/29/2013 2:41:04 AM | Location : United States

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