If D₁ = $1.25,g (which is constant)= 4.7%,and P₀ = $30.00,then what is the stock's expected dividend yield for the coming year?

Question

Quizplus · Accepted Answer

The formula for dividend yield is: Dividend yield = Annual dividend per share / Stock price per share We need to find the annual dividend per share. D₁ = $1.25 is the dividend paid for the most recent year. To find the expected dividend for the coming year, we need to apply the growth rate: Expected dividend per share = Dividend per share * (1 + growth rate) Expected dividend per share = $1.25 * (1 + 4.7%) Expected dividend per share = $1.31 Now we can calculate the expected dividend yield: Expected dividend yield = $1.31 / $30 Expected dividend yield = 4.37% Therefore, the best choice is C (4.17%).

If D1 = $1

If D₁ = $1