Question

DPS CALCULATION Weston Corporation just paid a dividend of $1.25 a share (i.e., Do = $1.25). The dividend is expected to grow 10% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places. D1 = $ D2 = " " D3 D4 = $ D5 = "

Answer 1

Given that the dividend is expected to grow at 10% a year for next 3 years and then 5% thereafter.
Now, using the values given in the question,we can calculate the values of dividends from year 1 to year 4.

D1=D0*(1+Growth rate)
=1.25*(1+10%)=1.25*1.1=$1.375 or $1.38 (Rounded to two decimal places)

D2=D1*(1+Growth rate)
=1.375*(1+10%)=1.375*1.1=$1.5125 or $1.51 (Rounded to two decimal places)

D3=D2*(1+Growth rate)
=1.5125*(1+10%)=1.5125*1.1=$1.66375 or $1.66 (Rounded to two decimal places)

D4=D3*(1+Growth rate)
=1.66375*(1+5%)=1.66375*1.05=$1.7469375 or $1.75 (Rounded to two decimal places)

D5=D4*(1+Growth rate)
=1.7469375*(1+5%)=1.7469375*1.05=$1.834284 or $1.83 (Rounded to two decimal places)