Question

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?

Answer 1

Answer: The dividend yield is $1851.

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:

`\text{Current price}=\frac{Dividend}{\text{Required Rate - Growth rate}}\\\\47=(Divident)/(0.14-0.086)\\\\47* 0.054=Dividend\\\\2.538=Dividend`

So, Dividend yield is given by

`\frac{\text{Current price}}{\text{Market price}}* 100\\\\=(47)/(2.538)* 100\\\\=18.51* 100\\\\\approx 1851`

Hence, the dividend yield is $1851.