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A security is expected to pay a dividend of $2.50 next year. In addition, dividends are...

A security is expected to pay a dividend of $2.50 next year. In addition, dividends are expected to grow at 4% per annum and investors have a 12% required rate of return. a. What will the dividends be in each year for the next 200 years? Set this up on an excel spreadsheet with the years going down a column using Excel. What is the present value of the above dividend stream ?  What is the sum of the dividends expected to be paid?

Solutions

Expert Solution

Below is the calculation of dividend and the PV

So on all the dividends are calculated

Similarly the PV for all dividends are calculated. The sum of the PV add up to 31.25

The same can be calculated by the formula of PV of growing annuity:


jeff jeffy answered 1 year ago
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