Question

DPS CALCULATION Weston Corporation just paid a dividend of $1.5 a share (i.e., D0 = $1.5). The dividend is expected to grow 12% a year for the next 3 years and then at 3% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places. D1 = $ D2 = $ D3 = $ D4 = $ D5 = $

Answer 1

Calculation of the Expected Dividends

Formula :-

D_n = D_n-1 * (1+g)

Here D_n= Expected dividend for nth year

D_n-1 = Dividend paid just before the nth year.

g = Growth rate for nth year

Particulars	Expected dividend
D1	$                          1.68
D2	$                          1.88
D3	$                          2.11
D4	$                          2.17
D5	$                          2.24

Particulars	Last Dividend paid	Growth rate	1+growth rate	Expected dividend during the year
D1	$            1.50000000	12%	1.12	$                                              1.68000000
D2	$            1.68000000	12%	1.12	$                                              1.88160000
D3	$            1.88160000	12%	1.12	$                                              2.10739200
D4	$            2.10739200	3%	1.03	$                                              2.17061376
D5	$            2.17061376	3%	1.03	$                                              2.23573217