Portman Industries just paid a dividend of $2.16 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. The required rate of return is 13.6%. Assuming that the market is in equilibrium. Required:
What is the expected dividend yield for Portman's stock today?

Expected Dividend Yield is 10.4%

Explanation:

As we know that the Expected Dividend Yield for Portman’s Stock can be calculated using the following formula:

Expected Dividend Yield = [D0 x (1 + g) / Intrinsic Value (Step1)] * 100

Here

Dividend just paid is $2.16 per share

The growth rate for the Portman's stock is 16% for the first year

Ke is 13.6%

Intrinsic Value = $24.09 (See Step 1)

By putting the above values in the above equation, we have:

Expected Dividend Yield = [$2.16 x (1 + 0.16) / $24.09] x 100

= 10.4%

Step 1. Intrinsic Value can be calculated using the following formula:

Intrinsic Value = D1 / (1 + r)^1   +  Horizon Value (Step 2) / (1 + r)^1

Here

Growth (g) will be 3.2% for the year 2 because D2 = D1 * (1 + g)

Horizon value = D1 * (1 + g) / (Ke – g) = $2.5056 * (1 + 3.2%) / (13.6% – 3.2%)

= $2.5858 / 0.0752 = $24.86 per share

So by putting the above values in the step 1, we have:

= $2.5056 / (1 + 0.136)1 + $24.86/(1 + 0.136)1

= $24.09 per share

choices : )

explanation:

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.