Find what is the expected dividend yield

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XYZ has been growing at a rate of 30% per year in recent years. This same supernormal growth is expected to last for another two years (30% for Year 0 to Year 1 and Year 1 to Year 2), then at a constant rate of 10% thereafter.

Question a. If D0 = RM1.80, rs = 12%, then what is XYZ's stock worth today? What is the expected dividend yield and its capital gains yield at this time?

Question b. Now assume that XYZ's period of supernormal growth is to last another 5 years rather than 2 years. How would this affect its price, dividend yield and capital gains yield?

Question c. What will XYZ's dividend yield and capital gains yield be once its period of supernormal growth

Question d. Of what interest to investors is the relationship over time between dividend yield and capital gains yield?

Reference no: EM132544900

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