Question

Find the average annual growth rate of the dividends for each firm listed in the following table.

Dividend Payment per Year

Firm	2006	2007	2008	2009	2010	2011
Loewen	​$1.021.02	​$1.051.05	​$1.301.30	​$1.211.21	​$1.271.27	​$1.311.31
Morse	​$1.001.00	​$0.970.97	​$0.700.70	​$1.101.10	​$1.201.20	​$1.351.35
Huddleston	​$1.751.75	​$2.502.50	​$3.603.60	​$3.803.80	​$3.903.90	​$5.255.25
Meyer	​$2.252.25	​$2.502.50	​$2.102.10	​$2.742.74	​$2.852.85	​$3.00

Answer 1

Annual Growth Rate = (1+r)^1/n -1 = (1 + (P₂₀₁₁ - P₂₀₀₆)/P₂₀₀₆)^1/5 - 1

where, P₀ is the initial price, P_n is the price after n years

For Loewen, Annual Growth rate = (1 + (1311.31 - 1021.02)/1021.02)^1/5 - 1 = 0.0513 or 5.13%

For Morse, Annual Growth rate = (1 + (1351.35 - 1001.00)/1001.00)^1/5 - 1 = 0.0619 or 6.19%

For Huddleston, Annual Growth rate = (1 + (5255.25 - 1751.75)/1751.75)^1/5 - 1 = 0.2457 or 24.57%

For Meyer, Annual Growth rate = (1 + (3.00 - 2252.25)/2252.25)^1/5 - 1 = -0.7340 or -73.40%