Problem:
Credenza Industries is expected to pay a dividend of $1.20 at the end of the coming year. It is expected to sell for $62.00 at the end of the year.
Required:
Question: If its equity cost of capital is 8%, what is the expected capital gain from the sale of this stock at the end of the coming year?
a) 14.28
b) 58.52
c) 4.86
d) 3.48
Note: Show all workings.