Francis Inc.'s stock has a required rate of return of 10.25%,and it sells for $57.50 per share.The dividend is expected to grow at a constant rate of 6.00% per year.What is the expected year-end dividend,D₁? A)$2.20 B)$2.44 C)$2.69 D)$2.96 E)$3.25

Question

Quizplus · Accepted Answer

The expected year-end dividend can be calculated using the constant growth dividend model as follows:

D1 = D0 x (1 + g)
where,
D0 = current dividend = $2.00
g = expected constant growth rate = 6% = 0.06
D1 = expected year-end dividend

D1 = $2.00 x (1 + 0.06) = $2.12

Therefore, the expected year-end dividend is $2.12, which is closest to option B ($2.44).