Question

g announced that it will pay a dividend next year of $1.60 and is establishing a policy whereby the dividend will increase by 3.5% annually thereafter. How much will one share be worth five years from now if the required rate of ret

Answer 1

Answer and Explanation:

Dividends in 6th year = 1.6 * 1.035 = $1.85

$1.6 is for next year that is why I multiplied it by 1.035 .

Share price after 5 years = 1.85/(0.12 - 0.03)

Share price after 5 years = 1.85/0.09

Share price after 5 years = $20.55