A firm's dividends have grown over the last several years. 3 years ago the firm paid...
A firm's dividends have grown over the last several years. 3 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm?
Round the answer to two decimal places in percentage form.
Homework Answers
The dividend paid 3 years back was $2.
The dividend paid after 3 years is $7.
So, the growth rate of dividend is :
= 2(1 + growth rate)^3 = 7
Growth rate = ($7/ $2) ^ 1/3
Growth rate = 51.82%
It can also be computed as ,
PV = ($2)
FV = $7
N = 3 YEARS
COMPUTE I/Y
So, I/Y = 51.83
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