Question

Dorpac's corporation has a dividend yield of 1.7%. equity cost of capital s dividends are expected to grow at a constant r .

a. what is the expected growth rate of dorpac's dividends .
b. what is the expected growth rate of dorpac's share p.

Answer 1

To find the expected growth rate of Dorpac's dividends, we can use the dividend yield formula. However, the equity cost of capital is not provided, so we cannot determine the growth rate. Similarly, to find the expected growth rate of Dorpac's share price, we can use the Gordon Growth Model. However, the share price is not provided, so we cannot determine the growth rate.

Step-by-step explanation:

To find the expected growth rate of Dorpac's dividends, we can use the formula for dividend yield: Dividend Yield = Dividends / Equity Cost of Capital. Rearranging this formula to solve for the expected growth rate, we have Growth Rate = Dividend Yield / Equity Cost of Capital. In this case, the dividend yield is given as 1.7% and the equity cost of capital is not provided. Therefore, we cannot determine the expected growth rate of Dorpac's dividends without knowing the equity cost of capital.

To find the expected growth rate of Dorpac's share price, we can use the Gordon Growth Model, which states that Share Price = Dividends / (Cost of Equity Capital - Growth Rate of Dividends). Rearranging this formula to solve for the growth rate, we have Growth Rate = Cost of Equity Capital - (Dividends / Share Price). In this case, the dividend yield is given as 1.7% and the share price is not provided. Therefore, we cannot determine the expected growth rate of Dorpac's share price without knowing the share price.