Crazee Enterprises Corporation just paid a dividend and it expects that dividend

Question

Crazee Enterprises Corporation just paid a dividend and it expects that dividend to grow by 10 percent for the next three years. After that, the dividend is expected to grow at a constant rate of 5 percent in perpetuity. If the company's stock is currently selling for $72 per share and the required return is 10 percent, what is the amount of the NEXT dividend, i.e., D1?

There are some people on Chegg saying its 3.3 and others says its 3.6. I'm not sure what is right, or if either of those answers are right.

Explanation / Answer

D1 = D4/(1+g)^3

ie= 4.7916/1.1^3

ie= 3.6

year D 1 3.6 2 3.96 3 4.356

D1 = D4/(1+g)^3

ie= 4.7916/1.1^3

ie= 3.6

AS per constant growth model, P3 = D4/(Re-g) ie= 72*1.1^3 = D4/(0.1-0.05) ie= 95.832 *0.05 =D4 D4= 4.7916 So D1 =3.6

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