Given the Following Information, Calculate the Expected Capital Gains Yield

question 50

Multiple Choice

Given the following information, calculate the expected capital gains yield for Chicago Bears Inc.: beta = 0.6; r_M = 15%; r_RF = 8%; = $2.00; P₀ = $25.00.Assume the stock is in equilibrium and exhibits constant growth.

• A) 3.8%
• B) 0%
• C) 8.0%
• D) 4.2%
• E) None of the above.

---

Definitions:

Marginal Cost

The increase in total cost that arises from producing an additional unit of a good or service.

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the quantity of output produced.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, illustrating how fixed costs per unit change with output levels.

MC

Marginal Cost, the cost of producing one additional unit of a good.