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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

DPS CALCULATION Weston Corporation just paid a dividend of $1.00 a share (i.e., D0 = $1.00). The dividend is expected to grow 12% 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.

Introduction:

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

Explanation

Given information:

Previous Year’s Dividends are $1.

The growth rate is 12%.

The formula to compute expected dividends per share:

Expected dividends per share=Previous year's dividends×(1+Growth rate)

Expected dividends per share:

Year

Previous

Year’s

Dividends

Growth

Rate

(%)

Dividends

($)

Current Year  1
Year 1112 $1(1+0.12)=$1

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