Question

Weston Corporation just paid a dividend of $1.25 a share (i.e., D0 = $1.25). The dividend is expected to grow 12% a year for the next 3 years and then at 3% 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

D1=$1.40 | ||||

D2=$1.57 | ||||

D3=$1.76 | ||||

D4=$1.81 | ||||

D5=$1.86 | ||||

Working Notes: | ||||

D1 = D0 x (1+g) = $1.25 x (1+0.12) =$1.40 | ||||

D2 = D1 x (1+g) = $1.40 x (1+0.12) =$1.568 = $1.57 | ||||

D3 = D2 x (1+g) = $1.568 x (1+0.12) =$1.75616 = $1.76 | ||||

D4 = D3 x (1+g) = $1.75616 x (1+0.03) =$1.8088448 = $1.81 | ||||

D5 = D4 x (1+g) = $1.8088448 x (1+0.03) =$1.863110 = $1.86 | ||||

Please feel free to ask if anything about above solution in comment section of the question. |

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