Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 30 pe

Question

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 20 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 10 percent, and the stock currently sells for $76 per share. What is the projected dividend for the coming year.

i keep getting 11.82 but yeah... need help thanks.

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 20 percent over the following year, and then 6 percent per year indefinitely. The required return on this stock is 10 percent, and the stock currently sells for $76 per share. What is the projected dividend for the coming year.

i keep getting 11.82 but yeah... need help thanks.

Explanation / Answer

76 = D*1.3/1.1)+((D*1.3^2)/1.1^2)+((D*1.3^3)/1.1^3)+((D*(1.3^3)*1.2)/1.1^4)+((D*(1.3^3)*(1.2)*1.06)/((.1-.06)*1.1^4))

SOlve for D

76 = (1.3/1.1)+((1.3^2)/1.1^2)+((1.3^3)/1.1^3)+(((1.3^3)*1.2)/1.1^4)+(((1.3^3)*(1.2)*1.06)/((.1-.06)*1.1^4))

76 = D*53.7483

D = 76/53.7483 = 1.4139

Answer,

D1 = D*1.3 = 1.4139*1.3 = $1.838

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