Moderate Growth Company paid a dividend last year of $2.45. The expected ROE for next year...

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Question

Moderate Growth Company paid a dividend last year of $2.45. The expected ROE for next year is 13%. An appropriate required re

Answer 1

Answer #1

Growth Rate in Dividend = Plowback Rate(ROE)

Growth Rate in Dividend = 0.56(0.13) = 7.28%

Dividend in Year 1, D₁ = D₀(1 + g)

Dividend in Year 1, D₁ = 2.45(1.0728)

Dividend in Year 1, D₁ = $2.63

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Answer 2

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