Final answer:
The expected dividend to be paid in year 3 is $5.88, after applying a 3% growth rate to the year 2 dividend of $5.71.
Step-by-step explanation:
The expected dividend to be paid by a company in year 3 can be calculated based on the information given about the dividends for the previous years and the growth rate. If the company paid a dividend of $5.71 in year 2 and expects to increase the dividend at a rate of 3 percent per annum, then the year 3 dividend can be found by multiplying the year 2 dividend by 1 plus the growth rate (expressed as a decimal).
To calculate the year 3 dividend:
Identify the dividend paid in year 2: $5.71Determine the growth rate: 3%
Convert the growth rate to decimal form: 3% = 0.03
After rounding to the nearest cent, the expected dividend to be paid in year 3 is $5.88.