Suppose a Share of Stock Was Purchased 20 Years Ago

question 83

Essay

Suppose a share of stock was purchased 20 years ago for $20, and its current value is $300. Also suppose that the current dividend per share is $15 and that interest rates are 11.5 percent. Calculate the current dividend yield.

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Definitions:

Free Cash Flow

The amount of cash generated by a company after accounting for capital expenditures, essential for expansion and maintenance of operations.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from total revenue, representing the profit.

Dividends Paid

Cash or other forms of assets distributed by a corporation to its shareholders out of its earnings.

Average Collection Period

The average number of days it takes a company to receive payment after a sale has been made.