Carl Patterson likes investing in stocks that pay dividends. Carl owns 120 share
ID: 2772095 • Letter: C
Question
Carl Patterson likes investing in stocks that pay dividends. Carl owns 120 shares of a local utility company. The stock pays a regular annual dividend in the amount of $5.50 per share and the company has indicated that the dividend will stay the same for a long time. If Carl reinvests his dividends each year and the dividends earn a return of 7 percent each year, how much will Carl accumulate in 14 years? Use Exhibit 1-B. (Round time value factor to 3 decimal places and final answer to 2 decimal places.)
Explanation / Answer
He will end up with 14883 dollars at the end of 14th year.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 No of shares 120 120 120 120 120 120 120 120 120 120 120 120 120 120 Dividend per share 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 Total Dividends 660 660 660 660 660 660 660 660 660 660 660 660 660 660 Interest Rate (%) 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% Opening 0 660 1366 2122 2930 3795 4721 5712 6771 7905 9119 10417 11806 13293 Add 660 706 756 809 865 926 990 1060 1134 1213 1298 1389 1486 1590 Close 660 1366 2122 2930 3795 4721 5712 6771 7905 9119 10417 11806 13293 14883