Question

Priscilla owns 500 shares of Deltona stock. It is January 1, 2016, and the company recently issued a statement that it will pay a $1 per share dividend on December 31, 2016, a $2.50 per share dividend on December 31, 2017, and then cease all future dividends. Priscilla does not want any dividend income this year but does want as much dividend income as possible next year. Priscilla can earn 8.5 percent on her investments. Ignoring taxes, what will Priscilla's homemade dividend per share be in 2017

Answer 1

Priscilla's homemade dividend per share be in 2017 will be $3.585

Step-by-step explanation:

In order to calculate what will be Priscilla's homemade dividend per share be in 2017 we would have to use the following formula:

homemade dividend=(Dividend in 2016×(1+Required rate))+Dividend in 2017

homemade dividend=($1×(1+8.5%))+$2.50

homemade dividend=$1.085+$2.50=$3.585

Priscilla's homemade dividend per share be in 2017 will be $3.585