Redline Motors has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3.5% annually. The last dividend it paid was $1.21 a share. What will its dividend be 7 years from now?
A) $1.44
B) $1.49
C) $1.54
D) $1.56
E) $1.58

Question

Quizplus · Accepted Answer

To find the dividend 7 years from now, use the formula for future value of a growing annuity: Future Dividend = Last Dividend * (1 + growth rate)^number of years. Here, it is $1.21 * (1 + 0.035)^7 = $1.54.

Redline Motors Has Adopted a Policy of Increasing the Annual