D0 = $2.25, g (which is constant) = 3.5%, and P0 = $50, what is the stock's expected dividend yield for the coming year?

Question

Quizplus · Accepted Answer

To calculate the expected dividend yield, we need to use the formula: 
Expected Dividend Yield = D1 / P0 
where D1 is the expected dividend for the coming year. 
We can calculate D1 using the constant growth model: 
D1 = D0 * (1 + g) = $2.25 * (1 + 0.035) = $2.33 
Plugging this into the formula, we get: 
Expected Dividend Yield = $2.33 / $50 = 0.0466 or 4.66% 
Therefore, the best choice is B.

D0 = $225, G (Which Is Constant) = 3