BaM-Ch05 - Chapter 5. Ch 5-20 Build a Model 1. Find the...

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Unformatted text preview: Chapter 5. Ch 5-20 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 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= = + (1 + r) = + = 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 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....
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