Final answer:
The dividend yield for Im, Incorporated is 5.05%, and the expected capital gains yield is 6%. For Babble, Inc., the price per share would be calculated by discounting the future dividends of $15 million, $20 million, and $25 million, then dividing by 200 shares, but the specific share price depends on the discount rate used.
Step-by-step explanation:
When we consider the case of Im, Incorporated, to calculate the dividend yield, we use the formula: Dividend Yield = (Annual Dividend Per Share / Price Per Share) * 100. For Im, Incorporated, the dividend yield would be (($1.92 / $38) * 100), which equals 5.05%. As the dividends are projected to grow at a rate of 6 percent forever, this growth rate is also the expected capital gains yield since the price of the stock should, theoretically, increase at the rate of dividend growth in a stable financial market without any other external influences. Therefore, the capital gains yield is 6%.
Turning to the case of Babble, Inc., an investor would calculate the value of a share by discounting the expected future dividends to their present value. We have three dividends: $15 million, $20 million, and $25 million. Discounting each of these dividends by an investor's required rate of return (which has not been given in the question so typically a market rate would be used) for the period until they are received, and then adding those discounted values together gives the present value of the total dividends. This total is then divided by the number of shares (200) to find the price per share an investor would pay today for Babble, Inc.