e201_hw3_spr10_costanzo

Without green arrows what is the benefit to the

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Unformatted text preview: for a circular flow diagram. Without green arrows, what is the benefit to the public company doing the repurchasing? a. The Dividend Yield is not the same as the total return on holding stock because Total Return= Dividend Yield + Capital Gains Yield. Also, Dividend Yield's own equation= dividend per share paid during period/share price at end of previous period b. No, Dividend Yield can not be negative. Neither the numerator or the denominator of the Dividend Yield Equation can be negative. You will never be paid a negative dividend and you share prices may sometimes be low, but there is no such thing as a negative share price. However, Dividend Yield can be larger than the total return on a stock because the Capital Gains Yield can be negative. A stock's previous periods share price could be higher than the current share price making the Capital Gains Yield negative. Since Total Return= Dividend Yield + Capital Gains Yield a negative Capital Gains Yield will cause the Total Return to be lower...
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