Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter.

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Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter.

Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. The required return is 13 percent and the company just paid a dividend of $2.75.

What are the dividends each year for the next four years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

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Answer 1

Answer #1

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

Dividend in year 1= 2.75 * (1+30%)

= 3.58

Dividend in year 2= 2.75 * (1+30%)^2

= 4.65

Dividend in year 3 = 2.75 * (1+30%)^3

= 6.04

Dividend in year 4 = 2.75 * (1+30%)^3 * 1.06

= 6.40

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Answer 2

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Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter.