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I-Sage, whose common stock is currently selling for $12.00 per share is expected to pay a $1.80...

Question:

I-Sage, whose common stock is currently selling for $12.00 per share is expected to pay a $1.80 dividend and sell for $14.40 one year from now. What are the dividend yield , growth rate and total rate of return, respectively?

Total Rate of Return:


The total return of from a stock comprises of its dividend and capital gain distributions. To obtain it, both are added together and the sum is then divided by the base market price.

Answer and Explanation:


Dividend Yield = Dividend / Current market price

= $1.8 / $12 = 0.15 or 15%

Growth rate = $14.4 - $12 / $12

= 0.20 or 20%

Total rate of return = Dividend + Capital gain / Current MPS

= $1.8 + $2.4 / $12

= 0.35 or 35%


Learn more about this topic:

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What Is Dividend Yield? - Definition & Calculation

from Corporate Finance: Help & Review

Chapter 2 / Lesson 10
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