Question

LB Corp. has been growing at a rate of 11% per year in recent years. This same growth rate is expected to last indefinitely. The dividend just paid (D0) was $9.03 and the required rate of return is 14%. What is the value in year 4 of the dividend paid in that year?

Answer 1

the value of the dividend paid in year 4 is $13.71

Step-by-step explanation:

The computation of the value of the dividend paid in year 4 is as follows:

Dividend at year 4 is

= Dividend paid × (1 + growth rate)^time period

= $9.03 × (1 + 0.11)^4

= $9.03 × 1.51807041

= $13.71

hence, the value of the dividend paid in year 4 is $13.71

We simply applied the above formula so that the correct value could come

And, the same is to be considered