Newton, Inc.just paid an annual dividend of $0.95 .Their dividends are expected to increase by 4% annually.Newton Company stock is selling for $11.54 a share.What is the capitalization rate on this stock?

Question

Quizplus · Accepted Answer

First, we need to calculate the expected dividend for the next year:
Annual Dividend = $0.95 x 1.04 = $0.988
Next, we can calculate the capitalization rate (also known as the dividend yield) using the formula:
Capitalization Rate = Annual Dividend / Stock Price
Capitalization Rate = $0.988 / $11.54 = 0.08556 or 8.56%
Therefore, the closest answer choice is C) 12.6%.