Grand trunk inc., a furniture manufacturing company, does not manufacture furniture until an order is received. it coordinates a
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Answer:
D1 = $1.12
D2 = $1.25
D3 = $1.40
D4 = $1.48
D5 = $1.55
Explanation:
The formula to calculate dividends for next years is:
Where D_n is successive year dividend
D_(n-1) is previous year dividend
g is the growth rate (given as 12% = 12/100 = 0.12)
Initial dividend is $1, D_0
So, lets calculate the dividends for 5 years:
Year 1:
D1 = 1(1+0.12) = 1(1.12) = $1.12
Year 2:
D2 = D1(1+g) = 1.12(1.12) = 1.2544 = $1.2544
Year 3:
D3 = D2(1+g) = 1.2544(1.12) = 1.404928 = $1.404928
Year 4:
D4 = D3(1+g) = 1.404928(1+0.05)1.404924(1.05) = $1.4751744
Year 5:
D5 = D4(1+g) = 1.4751744(1.05) = $1.54893312