Question

Suppose a stock had an initial price of $74 per share, paid a dividend of $1.30 per share during the year, and had an ending share price of $91. Compute the percentage total return.

Answer 1

We know the stock has a required return of 12 percent, and the dividend and capital gains yield is equal.

Dividend yield and capital gains yield

Dividend yield = 1/2(.12)

Dividend yield = .060 = Capital gains yield

Now we know both the dividend yield and capital gains yield. The dividend is simply the stock price times the dividend yield, so:

D1 = .060($65.50)

D1 = $3.93

This is the dividend for next year. The question asks for the dividend this year. Using the relationship between the dividend this year and the dividend next year:

D1 = D0(1 + g)

We can solve for the dividend that was just paid:

$3.93 = D0(1 + .060)

D0 = $3.93 / 1.060

D0 = $3.71

To learn more about the dividend visit the link

https://brainly.com/question/28044310

#SPJ4