FIA Industries just paid a dindend of S 21 a share Le D21 T

FIA Industries just paid a dindend of S 2.1 a share (Le D,-21 ). The dridend is expected to grow 14 % a year for the next 3 years and then at 6% a year thereafter. What is the expected dividend per share for year 5 (Le D 5 )Round your answers to two decimal places.

Solution

Dividend in year 0 (D0) = 2.1 D3 = D0X(1+r)^3 r = 14% D3 = 2.1X(1+14%)^3 = 3.1 D5 = D3X(1+6%)^2 = 3.50