High Tech Chip Company paid a dividend last year of $2.50.The expected ROE for next year is 12.5%.An appropriate required return on the stock is 11%.If the firm has a plowback ratio of 60%, the dividend in the coming year should be

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The dividend next year can be calculated using the formula for the Gordon Growth Model (Dividend Growth Model), which is P0 = D0(1 + g) / (r - g), where P0 is the price today, D0 is the dividend today, g is the growth rate, and r is the required rate of return. However, to find the dividend for next year (D1), we use D0(1 + g). The growth rate (g) can be calculated as the Return on Equity (ROE) times the plowback ratio (b), so g = ROE * b = 12.5% * 60% = 7.5%. Therefore, the dividend next year (D1) is D0(1 + g) = $2.50 * (1 + 7.5%) = $2.50 * 1.075 = $2.6875, which rounds to $2.69.

High Tech Chip Company Paid a Dividend Last Year of $2.50.The