Last year,when the stock of Alpha Minerals was selling for $55 a share,the dividend yield was 3.2 percent.Today,the stock is selling for $41 a share.What is the total return on this stock if the company maintains a constant dividend growth rate of 2.5 percent?

Question

Quizplus · Accepted Answer

D₀ = 0.032 × $55 = $1.76 (Note: $55 is P_-1.); Total return = [($1.76 × 1.025)/$41] + 0.025 = 6.90 percent

Last Year,when the Stock of Alpha Minerals Was Selling for $55