Payne amp; Rennie Company has paid a dividend of DIV0=$3. Due to a new product, Payne amp; Rennie expects is short-run growth rate in dividends to…

October 18, 2020/in Business and Finance 2 /by Brainy

Payne & Rennie Company has paid a dividend of DIV0=$3.00. Due to a new product, Payne & Rennie expects is short-run growth rate in dividends to equal 20% annually for the next 2 years. After this time, growth is expected to return to the long-run constant rate of 10 % The required rate of return on the company’s equity is 15%. What should the dividend yield (DIV/P0) be today?

a. 2.33%

b. 3.93%

c. 4.60%

d. 10.00%

e. 7.54%