Question

You believe that the required return on Allegheny Publishing’s stock is 15.82 % and thus at...

You believe that the required return on Allegheny Publishing’s stock is 15.82 % and thus at today’s price of $35.08 you believe the stock is undervalued. Additionally, the stock is expected to pay a year-end dividend, D1, of $6.22 and grow perpetually at a constant rate of 4.17 percent per year. If you buy the stock and hold for one year when the price converges to the intrinsic value (after one year). What would be your capital gains yield from the one year investment (answer as a percentage)?

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