Answer:
D = 2.15
Explanation:
let D be next year dividend
D2 = D * 1.3 = 1.3D
D3 = D * 1.3^2 = 1.69D
D4 = D * 1.3^2 * 1.2 = 2.028D
price at year 4 = D * 1.3^2 * 1.2 * 1.05/(0.11-0.05) = 35.49D
current price = 60
=>
D/1.11 + 1.3D/1.11^2 + 1.69D/1.11^3 + 2.028D/1.11^4 + 35.49/1.11^4 = 60
Answer:
The coming year dividend is 2.9762
Explanation:
Let us suppose the dividend of the current year is x so
[tex]Value=\sum \dfrac{Div (1+r\%)^n}{1+rr\%}[/tex]
Here div is the dividend which is to be found as x
r is the growth rate given as 25% for first 3 years, 18% for fourth year and 8% onwards
rr is the stock rate of return which is given as 15%
Current value is given as 60
So
[tex]60= \dfrac{x (1.25)^1}{(1.15)^1}+ \dfrac{x (1.25)^2}{(1.15)^2}+\dfrac{x (1.25)^3}{(1.15)^3}+\dfrac{x (1.25)^3(1.18)^1}{(1.15)^4}+\dfrac{x (1.25)^3(1.18)^1(1.08)^1}{(0.15-0.08)(1.15)^4}\\\dfrac{1.25x}{1.15}+\dfrac{1.5625x}{1.3225}+\dfrac{1.953125x}{1.520875}+\dfrac{2.3046875x}{1.74900625}+\dfrac{2.4890625x}{0.1224304375}=60\\x=2.381[/tex]
So the current year dividend is 2.381, the next year dividend is given as
Next year =Current Year * (1+r%)
Next year =2.381 * (1.25)
Next year=2.9762
So the coming year dividend is 2.9762
