A stock plans to make its next dividend payment $5.00. Dividends are expected to decline by...

A stock plans to make its next dividend payment $5.00. Dividends are expected to decline by 2% per year indefinitely. The required return is 7%.

a. Find stock price today, in 5 years, and in 20 years.

b. Find dividend yield and capital gains yield this year, in 5 years, and in 20 years.

Expert Solution

jeff jeffy answered 1 year ago

Johnstown Supply Corporation stock is currently selling for $58.00. It is expected to pay a dividend of $5.00 next year.

Johnstown Supply Corporation stock is currently selling for $58.00. It is expected to pay a dividend of $5.00 next year. Dividends are expected to grow at a constant rate of 7.5% indefinitely. Compute the required rate of return on Johnstown Supply Corporation stock. What is the dividend yield? What is the capital gains yield?

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