Question

Consider four different stocks, all of which have a required return of 16 percent and a most recent dividend of $2.80 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 8 percent, 0 percent, and −5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 12 percent growth rate, thereafter.

Requirement 1:

What is the dividend yield for each of these four stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Dividend yield
Stock W	%
Stock X	%
Stock Y	%
Stock Z	%

Requirement 2:

What is the expected capital gains yield for each of these four stocks? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places (e.g., 32.16).)

	Capital gains yield
Stock W	%
Stock X	%
Stock Y	%
Stock Z	%

Answer 1