Answer and Explaination:
To calculate Manuel's three-year yield on his Venus Horticulture Co. shares, you can consider both the dividends received and the change in the market value of the shares over the three-year period.
1. Calculate the total dividends received over three years:
Manuel owns 200 shares, and Venus pays an annual dividend of $8.00 per share. So, the annual dividend income is:
Annual Dividend Income = 200 shares * $8.00/share = $1,600/year
Over three years, Manuel receives:
Total Dividend Income = $1,600/year * 3 years = $4,800
2. Calculate the change in the market value of the shares over three years:
The shares were purchased for $75.00 per share and currently have a market value of $20.00 per share. To find the change in value per share:
Change in Value per Share = Current Market Value - Purchase Price
Change in Value per Share = $20.00/share - $75.00/share = -$55.00/share
Since the value decreased, Manuel experienced a loss of $55.00 per share.
3. Calculate the total change in value for all shares:
Total Change in Value = Change in Value per Share * Number of Shares
Total Change in Value = (-$55.00/share) * 200 shares = -$11,000
Now, calculate the three-year yield, taking into account both dividends and the change in value:
Three-Year Yield = (Total Dividend Income + Total Change in Value) / (Total Investment)
Three-Year Yield = ($4,800 - $11,000) / (200 shares * $75.00/share)
Three-Year Yield = (-$6,200) / ($15,000)
Three-Year Yield ≈ -0.4133 or approximately -41.33%
Manuel's three-year yield on his Venus Horticulture Co. shares is approximately -41.33%. It's negative because he experienced a decrease in the market value of his shares over the three-year period, resulting in an overall loss when considering both dividends and changes in share value.