Which of the following components is used to estimate a stock's expected return?

The correct choice identifies the components used to estimate a stock's expected return, which are the dividend yield and the capital gains rate.

The dividend yield represents the income generated from dividends relative to the stock price, providing a consistent return to shareholders. Meanwhile, the capital gains rate reflects the expected appreciation in the stock’s price over a period. Together, these two components form the total expected return on the stock, allowing investors to assess the potential profitability of their investment.

In finance, the expected return is essential for investors, as it helps them make informed decisions based on both income returns from dividends and potential price increases. This combined approach gives a more comprehensive view of the stock's performance expectations.

Other options fail to accurately combine components that directly pertain to estimating expected stock returns or do not represent the proper variables necessary for such calculations. For example, fixed costs and operating cash flow relate more to a company's overall financial performance rather than directly to stock return estimation. Similarly, total risk and market share focus on different aspects of a company's operation and competitive environment without defining a clear path to estimating expected returns. Interest rates and dividend payments, while relevant to certain financial analyses, do not together form a cohesive approach to determine expected stock returns as effectively as the dividend