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Ch07 P20 Build a Model

# Ch07 P20 Build a Model - A 1 2 3 4 5 6 7 8 9 10 11 12 13 14...

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4/16/2010 Chapter 7. Ch 7-20 Build a Model 1. Find the price today. \$1.60 10.0% 20% Short-run g; for Years 1-2 only. 6% Long-run g; for Year 3 and all following years. 20% 6% Year 0 1 2 3 Dividend PV of dividends 2. Find the expected dividend yield. Dividend yield = / Dividend yield = / Dividend yield = 3. Find the expected capital gains yield. The capital gains yield can be calculated by simply subtracting the dividend yield from the total expected return. Cap. Gain yield= Expected return Dividend yield Cap. Gain yield= Cap. Gain yield= = + = + = Cap. Gain yield= / Cap. Gain yield= / Cap. Gain yield= 1. Find the price today. \$1.60 10.0% 20% Short-run g; for Years 1-5 only. 6% Long-run g; for Year 6 and all following years. 20% 6% Year 0 1 2 3 4 5 6 Dividend PV of dividends = Part 2. Finding the expected dividend yield. Dividend yield = / Dividend yield = / Dividend yield = Part 3. Finding the expected capital gains yield. Cap. Gain yield= Expected return Dividend yield Cap. Gain yield= Cap. Gain yield= Dividend yield = / Dividend yield = / Dividend yield = Cap. Gain yield= Expected return
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