Toy Time’s common stock’s annual dividend for the next three years is expected to be $2. Thereafter, the dividend is expected to grow 4% per year. Stocks of Toy Time’s risk are expected to earn 11% per year.
a. calculate the share price today at the beginning of each of the next 4 years.
c. Calculate the dividend yield and capital gain yield for each year.
d. does the dividend yield plus the capital gain yield equal to the expected return each year? Briefly explain.