Question

If the dividend yield for year 1 is expected to be a 7% based on a stock price of 30 what will the year 5 divident be if dividents grow annually at a constant rate of 8%?

Answer 1

$3.09

Step-by-step explanation:

dividend in 5 years = dividend x ( + growth rate)^5

dividend yield = dividend / price

0.07 = dividend / 30

dividend = 30 x 0.07 = 2.1

2.1 x (1.08)^5 = 3.09