Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the fly-by-night corp. paid a dividend of $2.85 la

The Fly-By-Night Corp. paid a dividend of $2.85 last year and the dividend is expected to...

Free

70.2K

Verified Solution

Question

Finance

The Fly-By-Night Corp. paid a dividend of $2.85 last year andthe dividend is expected to grow at 5% per year for the foreseeablefuture. The company’s stock is currently selling for $38 per share.What are the expected dividend yield, capital gains yield, andtotal expected return for Fly-By-Night.

Answer & Explanation Solved by verified expert
3.6 Ratings (303 Votes)

Dividend last year=   2.85  
Growth rate=   5% or   0.05
Dividend next year (D1)= D0*(1+g)      
2.85*(1+0.05)=   2.9925  
Stock price =   38  


Required Return (ke) formula = D1/P0 + Growth rate      
(2.9925/38 ) + 0.05      
0.12875      


P1 or price at end = P0*(1+Growth)      
38*(1+0.05)=   39.9  
Dividend yield = D1/P0      
2.9925/38 =   0.07875   or 7.875%
      
Capital gain yield = (P1-P0)/P0      
(39.9 - 38)/38=   0.05   or 5%
      
Total Expected Return = Dividend yield + Capital gain yield      
0.07875 + 0.05 =   0.12875   or 12.875%
      
So Dividend yield is 7.875%, capital gain yield is 5% and Total yield is 12.875%      
      
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

The Fly-By-Night Corp. paid a dividend of $2.85 last year andthe dividend is expected to grow at 5% per year for the foreseeablefuture. The company’s stock is currently selling for $38 per share.What are the expected dividend yield, capital gains yield, andtotal expected return for Fly-By-Night.

Other questions asked by students

Q

What is the most interesting thing you've learned in plant biology and why?

Biology
Q

What cellular differences would you expect in cells found in the skeletal muscles compared to those...

Medical Sciences
Q

Lacey made a scale drawing of the middle school The scale of the drawing was...

Geometry
Q

mg Calcium levels in people are normally distributed with a mean of 9 3 and...

Statistics
Q

Shamrock Company started operations on January 1, 2020, and has used...

Accounting
Q

2S 11-11 (Algo) Preferred stock issuance and dividends LO C2 1. Prepare the journal entry...

Accounting
Q

**Case Study: XYZ Corporation - Accounting Management Challenges** XYZ Corporation is a multinational company operating...

Accounting
Q

Bluff County's schedule of changes in net pension liability and related ratios is shown below....

Accounting
Q

The ratio of costs to revenues can indicate opportunities for activity-based costing to increase efficiency...

Accounting
Q

As a result of a slowdown in operations, Tradewind Stores is offering employees who have...

Accounting
Q

Suppose XYZ stock is trading at 20. Suppose the effective annual interest rate is 5%,...

Finance
Q

d 16. All of the following describe a futures contract except...

Finance