Which of the following expressions gives the present value of future dividends for a company whose current dividend is $5.00 and whose future dividends are expected to grow at rate g?

Question

Quizplus · Accepted Answer

The correct expression for the present value of future dividends, assuming a current dividend of $5.00 and a growth rate of g, is given by the formula [$5.00(1 + g)]/(i - g), where i is the discount rate. This formula accounts for the initial dividend growing at a rate of g and is discounted back at the rate i.

Which of the Following Expressions Gives the Present Value of Future