Dividend growth rate is important to many investors.You are considering investing in a firm after looking at the firm's dividends over a seven-year period.At the end of the year 2002,the firm paid a dividend of $1.15.At year-end 2009,it paid a dividend of $1.84.What was the average annual growth rate of dividends for this firm?
A)7.25%
B)9.86%
C)6.94%
D)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

The average annual growth rate can be calculated using the formula for compound annual growth rate (CAGR): CAGR = (Ending Value/Beginning Value)^(1/Number of Years) - 1. Here, CAGR = ($1.84/$1.15)^(1/7) - 1 = 6.94%.

Dividend Growth Rate Is Important to Many Investors