Answer:
Explanation:
Using dividend growth model formula for finding dividend per year can be used to find the growth rate per year;
The formula would be D1 = D0(1+g)
and D2 = D1(1+g)
D3 = D2 (1+g) and so on....
Starting with 2.00 dividend, <u>growth rate from yr1-yr2;</u>
2.07 = 2.00*(1+g)
Divide both sides by 2.00;
1+g = 2.07/ 2.00
1+g = 1.035
g = 1.035-1
g ( y1-y2) = 0.035 or 3.5%
<u>Growth rate from yr2-yr3;</u>
2.24 = 2.07(1+g)
Divide both sides by 2.07;
2.24/2.07 = 1+g
1.0821 = 1+g
1.0821-1 = g
g= 0.0821 or 8.21%
Therefore, g(y2-y3) = 8.21%
<u>Growth rate from yr3-yr4;</u>
2.34 = 2.24(1+g)
Divide both sides by 2.24;
2.34/2.24 = 1+g
1.0446 = 1+g
1.0446 -1 =g
g =0.0446 or 4.46%
Therefore, g(y3-y4) = 4.46%
<u>Growth rate from yr4-yr5;</u>
2.50 = 2.34(1+g)
2.50/2.34 = 1+g
1.0684 = 1+g
1.0684-1 = g
g=0.0684 or 6.84%
Therefore, g(y4-y5) = 6.84%
