Just today, Fawlty Foods, Inc.’s common stock paid a $1.40 annual dividend per share and had a closing price of $21. Assume that the market’s required return, or capitalization rate, for this investment is 12 percent and that dividends are expected to grow at a constant rate forever.
a) Calculate the implied growth rate in dividends.
b) What is the expected dividend yield?
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c) What is the expected capital gains yield?