Question

Krell Industries has a share price of $ 22.69$22.69 today. If Krell is expected to pay a dividend of $ 0.77$0.77 this year and its stock price is expected to grow to $ 23.99$23.99 at the end of the year, what is Krell's dividend yield and equity cost of capital?

Answer 1

Share price Today = $22.69 (assumed today is opening)

Dividend This year = $0.77 (Assumed it is paid year end)

Stock price expected to grow = $23.99 ( Given expected value at year end).

Dividend Yield = Dividend / Stock value * 100

   = (0.77$/$22.69)*100 = 3.3926%

For a $ investment we are getting a dividend of 3.39%

Equity cost of capital = (Dividend + (Closing value- opening value)/Opening Value ) *100

   ($0.77+($23.99-22.69))/22.69 * 100 = 9.1229%