Question

What is the expected next dividend payment for New Town Corporation per share, given that the upcoming dividend is projected to be $2.85 and the dividends are anticipated to maintain a 6% growth rate indefinitely?

A) $2.69
B) $3.02
C) $2.42
D) $2.98

Answer 1

To calculate the expected next dividend payment for New Town Corporation per share, we need to use the formula for the present value of a growing perpetuity. However, the projected dividend payment given is invalid.

Step-by-step explanation:

To calculate the expected next dividend payment for New Town Corporation per share, we need to use the formula for the present value of a growing perpetuity. The formula is: D / (r - g), where D is the dividend payment, r is the discount rate, and g is the growth rate.

In this case, the upcoming dividend is projected to be $2.85, and the growth rate is 6%. Assuming a discount rate of 0%, we can calculate the expected next dividend payment as follows:

$2.85 / (0 - 0.06) = $2.85 / -0.06 = $-47.50.

Since a negative dividend is not possible, we can conclude that the projected dividend payment is invalid. Therefore, none of the given answer options are correct.