Shares of ordinary equity of the Samson Co.offer an expected total return of 12%.The dividend is increasing at a constant 8% per year.The dividend yield must be:
A)-4%.
B)4%.
C)8%.
D)12%.
E)20%.

Question

Quizplus · Accepted Answer

The expected total return of 12% is the sum of the dividend yield and the growth rate of the dividend. Given that the dividend is increasing at a constant 8% per year, to find the dividend yield, we subtract this growth rate from the total expected return: 12% - 8% = 4%.

Shares of Ordinary Equity of the Samson Co