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Compute the dividend yield

Johnson Catering Corporation will pay a $2.65 per share dividend next year. The company pledges to increase its dividend by 4.75 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company's stock today?

2. Calculating Returns: Suppose a stock had an initial price of $75 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $86.

a. Compute the percentage total return.

b. Compute the dividend yield.

c. Compute the capital gains yield

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## Q : Determine the expected rates of return

You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.