ABC Company has been growing at a 10% rate,and it just paid a dividend of D0 = $3.00.Due to a new product,ABC expects to achieve a dramatic increase in its short-run growth rate,to 20 percent annually for the next 2 years.After this time,growth is expected to return to the long-run constant rate of 10 percent.The company's beta is 2.0,the required return on an average stock is 11 percent,and the risk-free rate is 7 percent.What should the dividend yield ( /P0) be today?
A) 3.93%
B) 4.60%
C) 10.00%
D) 7.54%
E) 2.33%
Correct Answer:
Verified
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