What is the expected dividend to Be paid in three years if yesterday's dividend was $6.00, dividends are expected to grow at a constant 6 percent annual rate, and the firm has a 10 percent expected return?
A)$6.75
B)$7.15
C)$7.80
D)$9.37

Question

Quizplus · Accepted Answer

The expected dividend in three years can be calculated using the formula for future value of a growing annuity: $D_{n} = D_{0} \times (1 + g)^{n}$, where $D_{n}$ is the dividend in year n, $D_{0}$ is the initial dividend, $g$ is the growth rate, and $n$ is the number of years. Plugging in the values: $D_{3} = 6.00 \times (1 + 0.06)^{3} = 6.00 \times 1.191016 = \$7.15$.

What Is the Expected Dividend to Be Paid in Three