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johnpaech johnpaech
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6 years ago
Nielson Motors has a share price of $25 today. If Nielson Motors is expected to pay a dividend of $0.75 this year, and its stock price is expected to grow to $26.75 at the end of the year, then Nielson's dividend yield and equity cost of capital are:
A) 3.0% and 7.0% respectively.
B) 3.0% and 10.0% respectively.
C) 4.0% and 6.0% respectively.
D) 4.0% and 10.0% respectively.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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wrote...
#1
6 years ago
B
Explanation:  B) Dividend Yield = $0.75/$25 = .03 or 3%
Equity cost of capital = 0.75/25.00 + (26.75 - 25.00)/25.00 = .03 + .07 = .10 or 10%
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