Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also,...

Question:

Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 4% per year. If D0 = $4 and rs = 12%, what is the value of Mountain's stock?

Dividend Yield:

Dividend yield is used to calculate the percentage return on a stock based on dividends. This is very much useful to those investrors who rely heavily on the dividends from their investments.

Answer and Explanation:

The value of Mountain's stock is 33.33

To get the value of the stock, we will use the formula of dividend yield:

{eq}\displaystyle \text{Dividend...

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Homemade Dividends: Definition & Examples

from Finance 101: Principles of Finance

Chapter 16 / Lesson 2
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