QueStion62 points d FLA Industries just paid a dividend of S

QueStion6(2 points) d FLA Industries just paid a dividend of S 2 9.share (ie. D-29) The dindend n espected to grow 8 % a year for the next 3yan and then at 4%ayear thereafter What \"the expected dividend per share for year sae. D srRound your mwern to two decmal place.

Solution

Question 6

In this case, FIA industries just paid a dividend of $2.9 a share. The dividend is expected to grow 8% per year for the next 3 years and 4% per year thereafter.

Expected dividend in year 5 = 2.9*1.08³*1.04²

= $3.95

Question 7

Using Gordon Growth Model

P0 = D1 / (Ke-g)

Where

P0 - Current Market Price (?)

D1 - Expected next year dividend ($1.7)

Ke - rate of return (13%)

g - growth rate (5%)

P0 = D1 / (Ke-g)

= 1.7 / (.13-.05)

= 1.7 / .08

=$21.25