Question
- Current share price: $62.11
- Growth rate: 2%
- Expected or required return: 7.4%
Given the information above, if this company expects its dividends to grow forever at the above growth rate, what should its next expected dividend (D1
) be? (Round to the nearest cent.) Answer is 3.35. I need to know the formula and specific allocation of numbers. Given the information above, if this company expects its dividends to grow forever at the above growth rate, what should its next expected dividend (D1
) be? (Round to the nearest cent.) Answer is 3.35. I need to know the formula and specific allocation of numbers.
Explanation / Answer
The formula is :
Shares Price = D1/ (re-g)
So. 62.11 = D1/ (0.074-0.02)
Hence D1 = 62.11*0.054 = 3.35
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