Final answer:
The expected dividend per share for Weston Corporation for the next 5 years is calculated by applying the growth rates to the most recent dividend of $1.5. The dividends grow at 11% annually for the first three years and then at 4% thereafter, resulting in dividends of $1.67, $1.85, $2.05, $2.13, and $2.22 for years one through five, respectively.
Step-by-step explanation:
To calculate the expected dividends for Weston Corporation per share for the next 5 years, we apply the given growth rates to the most recent dividend. The first three years will see an annual growth of 11%, and the following years will grow at 4%.
- D1 = D0 × (1 + g1) = $1.5 × (1 + 0.11) = $1.5 × 1.11 = $1.665
- D2 = D1 × (1 + g1) = $1.665 × (1 + 0.11) = $1.665 × 1.11 = $1.84815
- D3 = D2 × (1 + g1) = $1.84815 × (1 + 0.11) = $1.84815 × 1.11 = $2.051445
- D4 = D3 × (1 + g2) = $2.051445 × (1 + 0.04) = $2.051445 × 1.04 = $2.133543
- D5 = D4 × (1 + g2) = $2.133543 × (1 + 0.04) = $2.133543 × 1.04 = $2.218884
Rounded to the nearest cent, the expected dividends per share for each of the next 5 years will be:
- D1 = $1.67
- D2 = $1.85
- D3 = $2.05
- D4 = $2.13
- D5 = $2.22