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Schultz Inc. is expected to pay equal dividends at the end of each of the next...

Schultz Inc. is expected to pay equal dividends at the end of each of the next three years. Thereafter, the dividend will grow at a constant annual rate of 5%, forever. The current stock price is $25. What is next year’s dividend payment if the required rate of return is 6 percent? (10 points)

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Answer #1

Let the next 3 years' equal Dividend paymnet be D

Growth rate of Dividend therafter(g) = 5% forever

Current price of Stock(P0) = $25

Required Return(ke) = 6%

Calculating the value of Dividend:-

D = $0.2768

So, next year’s dividend payment is $0.28

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