Answer:
4.52%
Explanation:
Annual dividend = $1.65
Stock price = $28.75
Total return on common stock = 10.25 percent
Therefore,
Required return of dividend:
= Annual dividend ÷ Stock price
= $1.65 ÷ $28.75
= 0.0573
= 5.73%
Capital gain rate:
= Total return - Required return of dividend
= 10.25% - 5.73%
= 4.52%
Hence, the capital gains rate is 4.52% if the company maintains a constant dividend.
