Dividend yield and equity cost of capital

1. Krell Industries has a share price of $22.00 today. If Knell is expected to pay a dividend of $0.88 this year and its stock price is expected to grow to $23.54 at the end of the year, what is Krell’s dividend yield and equity cost of capital?

2. No Growth Corporation currently pays a dividend of $0.50 per quarter, and it will continue to pay this dividend forever.

What is the price per share of No Growth stock if the firm’s equity cost of capital is 15% (effective annual rate)?

You just purchased a share of Northstar Sports for $100. You expect to receive a dividend of $5 in one year.

If you expect the price after the dividend is paid to be $110, what total return do you expect to earn over the year?

What do you expect to be your dividend yield? What do you expect to be your capital gain rate?


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