suppose a stock has just paid a 25 per share dividend. the dividend is projected to grow at 7% for the next 3 years then 5% thereafter indefinitely. what should be the amount of dividend in 4 years
Added by Thomas M.
Step 1
Let D be the initial dividend, which is $25. Year 1 dividend: D1 = D * (1 + 0.07) = 25 * 1.07 = $26.75 Year 2 dividend: D2 = D1 * (1 + 0.07) = 26.75 * 1.07 = $28.62 Year 3 dividend: D3 = D2 * (1 + 0.07) = 28.62 * 1.07 = $30.62 Show more…
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