Given the information in the table, what is the dividend yield from t=0 to t=1?
|
Today’s Dividend |
$4.00 |
|
Discount Rate |
7.91% |
|
Growth rate in dividends 0 to 1 |
7.54% |
|
Growth rate in dividends 1 to 2 |
8.10% |
|
Growth rate in dividends 2 to 3 |
7.59% |
|
Growth rate in dividends 3 onward |
3.44% |
The dividend yield from t=0 to t=1 is = Dividend in year 1/Current price
Dividend in year 1 = Today's dividend * (1 + Growth rate in dividends 0 to 1)
Dividend in year 1 = 4.00 * (1 + 0.0754)
Dividend in year 1 = $4.3016
The current share price is equal to the present value of future dividends.
The current price = $104.095816
The dividend yield from t=0 to t=1 is = Dividend in year 1/Current price
The dividend yield = 4.3016/104.095816
The dividend yield = 0.04132346683
The dividend yield = 4.132346683%
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