A company has just paid a $2 dividend per share. The dividend is expected to grow...

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A company has just paid a $2 dividend per share. The dividend is expected to grow...

A company has just paid a $2 dividend per share. The dividend is expected to grow at a constant rate of 9% per year for 3 years. After that, the dividend is expected to keep growing at a constant rate of 3% per year. The required return is 9%. What will the dividend be in 4 years?

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Answer 1

Answer #1

The dividend in the third year will be = 2 x 1.09^3 = 2.59.

So, the dividend in the 4th year will be = 2.59 x 1.03 = 2.6677

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Answer 2

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