The Windsor Group has paid dividends of $0.50, $0.60, $0.75, $0.90, and $0.99 over the past five years, respectively. Based on this information, D₁can be estimated as _____ and g can be estimated as ______ for use in the dividend growth model.

Question

Quizplus · Accepted Answer

The dividend growth rate (g) can be estimated using the formula:g = (D1 - D0) / D0where D1 is the dividend in the current year and D0 is the dividend in the previous year.Using the given data, we can calculate g as follows:g = (0.99 - 0.90) / 0.90 = 0.10 or 10%The dividend in the current year (D1) can be estimated using the formula:D1 = D0 * (1 + g)where D0 is the dividend in the previous year and g is the dividend growth rate.Using the given data, we can calculate D1 as follows:D1 = 0.99 * (1 + 0.10) = 1.089 or $1.08

The Windsor Group Has Paid Dividends of $0