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Zarrin [17]
4 years ago
11

NoMoreKidSongs Corp. paid a dividend last quarter of $6.18. It is expected to grow at 3% over the next year, 8%, the following y

ear, and 11% the year after that. After this period of non-constant growth, the dividends are expected to grow at a constant rate of 2% indefinitely. What is the dividend paid in year 2 after the first two years of non-constant growth
Business
1 answer:
pantera1 [17]4 years ago
8 0

Answer:

$6.87

Explanation:

The Dividend will grow first with non-constant growth rate and then after 3 years it will grow at a constant rate of 2%.

Last Dividend Paid = $6.18

In the first year the Growth rate is 3%

First Year Dividend = $6.18 ( 1 + 3% ) = $6.18 ( 1 + 0.03 ) = $6.18 ( 1.03 ) = $6.3654

In the Second year the Growth rate is 8%

Second Year Dividend = $6.3654 x ( 1 + 8% ) = $6.3654 x ( 1 + 0.08 ) = $6.3654 x ( 1.08 ) = $6.87

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