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Exalted Co. will pay a dividend of $2.25 per share at the end of year 1, and dividends per share are expected to grow at a rate of 10% per year in perpetuity. The return on equity is 12.8%. Suppose Exalted reduces this year's dividend by 27%, and its stock is expected to trade at $89.00 per share one year from now. Calculate the current share price, dividend yield and rate of capital gain for this case.
The answers are as follows:
Share price = $80.3568
Dividend yield = 0.0204
Rate of capital gain = 0.1076
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