Western Beef stock is valued at $62.10 a share. The company pays a constant annual dividend of $4.40 per share. What is the total return on this stock?

Question

Quizplus · Accepted Answer

To calculate the total return, we need to add the dividend yield to the capital appreciation. The dividend yield is the dividend per share divided by the stock price, which is $4.40/$62.10 = 0.0709 or 7.09%. The capital appreciation is the increase in stock price from the time of purchase to the time of sale. Since no information is given about the time frame, we assume it to be one year. Therefore, the capital appreciation is (current stock price - purchase price) / purchase price = (62.10 - purchase price) / purchase price. We do not know the purchase price, so we cannot calculate the capital appreciation. Hence, the total return is 7.09%, the dividend yield. Therefore, the best choice is C.

Western Beef Stock Is Valued at $62