Question

Anle Corporation has a current stock price of $ 16.96 and is expected to pay a dividend of $ 0.75 in one year. Its expected stock price right after paying that dividend is $ 19.17.

a. What is​ Anle's equity cost of​ capital?

b. How much of​ Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital​ gain?

a. What is​ Anle's equity cost of​ capital? ​Anle's equity cost of capital is nothing​%. ​(Round to two decimal​ places.)

b. How much of​ Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital​ gain? The portion of​ Anle's equity cost of capital that is expected to be satisfied by the dividend yield is nothing​%. ​(Round to two decimal​ places.) The portion of​ Anle's equity cost of capital that is expected to be satisfied by capital gains is nothing​%. ​(Round to two decimal​ places.)

Answer 1

a)cost of capital = [P1+D -P0]/P0

               =[19.17+.75-16.96]/16.96

              = 2.96/16.96

               = 17.45%

B)Dividend yield = Dividend /P0

               =[ .75/16.96

                 = 4.42%

Capital gain yield = [P1-P0]/P0

             =[19.17-16.96]/16.96

           = 2.21/16.96

             = 13.03%