Carly Fiorina owns stock in a company which has consistently paid a growing dividend over the last five years.The first year Carly owned the stock,she received $1.71 per share and in the fifth year,she received $2.89 per share.What is the growth rate of the dividends over the last five years?
A)7 percent
B)14 percent
C)12 percent
D)5 percent

Question

Quizplus · Accepted Answer

To calculate the growth rate of the dividends, we will use the formula for annual growth rate (r):
r = (Ending value / Beginning value)^(1/n) - 1

Where:
- Ending value = the dividend received in the fifth year = $2.89
- Beginning value = the dividend received in the first year = $1.71
- n = number of years = 5

r = ($2.89 / $1.71)^(1/5) - 1
r = 0.1427
r = 14.27%

Therefore, the growth rate of the dividends over the last five years is 14%, which corresponds to answer choice B.

Carly Fiorina Owns Stock in a Company Which Has Consistently