Finance: A firm’s common stock currently sells for $40 per share

Subject: Business    / Finance
Question

A firm’s common stock currently sells for $40 per share. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10% per year. What’s the firm’s cost of common stock using DCF approach?

9.5%

10.0%

15.5%

16.5%

A stock is selling for $50 in the market. The company’s beta is 1.2, the market risk premium (rM – rF) is 5%, and the risk-free rate is 3%. The most recent dividend paid is D0 = $2 and dividends are expected to grow at a constant rate g. What’s the dividend growth rate g for this stock?

3.00%

4.19%

4.81%

5.0%

Using the above information, find the stock’s capital gain yield.

3.00%

4.19%

4.81%

5.0%

Using the information from above Question, find the stock’s dividend yield.

3.00%

4.19%

4.81%

5.0%