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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

DPS CALCULATION Warr Corporation just paid a dividend of $1.50 a share (that is, D0 = $150). The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years?

Summary Introduction

To compute: The expected dividends per share for next 5 years.

Dividends per Share:

The periodic rewards received by the stockholders for their investment in a company are known as dividends. It is also measured on the basis of per share. Per share calculation of dividends is called dividends per share.

Explanation

Expected dividends per share:

Year Previous Year’s Dividends

Growth Rate

(%)

Dividends

($)

Current Year     1.5
Year 1 1.5 7 $1.5(1+0.07)=$1.605
Year 2 1.605 7 $1.605(1+0.07)=$1.717
Year 3 1.717 7 $1.717(1+0.07)=$1.837
Year 4 1.837 5 $1.837(1+0.05)=$1

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