Question

GCB has just paid a dividend of 240 cedis per share. Analysis of the past dividends reveals that GCB's dividends has been growing at the rate of 10% per annum and this is expected to continue to the foreseeable future.

What is the expected dividend per share for next year?

Answer 1

The expected dividend per share for GCB next year, given a current dividend of 240 cedis and a growth rate of 10% per annum, is calculated using the formula for future value of a growing dividend and results in a dividend of 264 cedis.

Step-by-step explanation:

To calculate the expected dividend per share for next year for GCB, we need to apply the constant growth rate of dividends. Given that GCB has just paid a dividend of 240 cedis per share, and the dividends are growing at a rate of 10% per annum, we use the formula for future value of a growing dividend which is D1 = D0 * (1 + g), where D1 is the dividend next year, D0 is the dividend this year, and g is the growth rate.

So the expected dividend for next year would be:

D1 = 240 cedis * (1 + 0.10)

D1 = 240 cedis * 1.10

D1 = 264 cedis

Therefore, the expected dividend per share for GCB next year is 264 cedis.