CF 9-1A – Stock Returns – Corporate Finance

Let's run through problem nine, one, a, we're computing returns on our investment return on a stock that we purchased. This is talking about the percentage change or the percentage return, uh, on our investment. You purchased one share of XYZ company stock for $50 XYZ company. Uh, I'm Canadian after one year, the stock price is $54 and the company will pay you a $1 dividend. Okay. So it asks first for us to calculate the percentage total return. And the total return is, well, the stock went up by $4 and we got a dividend of $1 it's a terrible circle I was about to do. So there's one more dollar there. So overall we're $5 ahead of where we started on a $50 investment, right? We've gained $5 on a $50 investment. So this is a 10% return, positive 10% return five divided by 50 is 0.1. And that's 10%. The dividend yield is, well, we got a $1 dividend on our $50 stock. That's 2% and capital gains yield is how much the stock went up or down. In this case, it went up by $4. It went up by 8% and it shouldn't be lost on you. There's a relationship here, right? The total return is the dividends plus the capital gains. That's our total return on our stock. Our stock returned to us 10%. All right, we've finished the problem. And before you finish watching, hit me with one of those. Have a great day. Thanks for watching. See you in the next one.