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For the past six years, the price of Slate Rock stock has been increasing at a rate of 8.6 percent a year. Currently, the stock is priced at $47 a share and has a required return of 14 percent. What is the dividend yield?

Respuesta :

Answer: The dividend yield is $1851.

Step-by-step explanation:

Since we have given that

Required return = 14% = 0.14

Growth rate = 8.6% = 0.086

Current price of stock = $47

So, we will use the formula below:

[tex]\text{Current price}=\dfrac{Dividend}{\text{Required Rate - Growth rate}}\\\\47=\dfrac{Divident}{0.14-0.086}\\\\47\times 0.054=Dividend\\\\2.538=Dividend[/tex]

So, Dividend yield is given by

[tex]\dfrac{\text{Current price}}{\text{Market price}}\times 100\\\\=\dfrac{47}{2.538}\times 100\\\\=18.51\times 100\\\\\approx 1851[/tex]

Hence, the dividend yield is $1851.

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