Trump Office Supplies paid a $3 dividend last year. The dividend is expected to

Question

Trump Office Supplies paid a $3 dividend last year. The dividend is expected to grow at a constant rate of 7 percent over the next five years. The required rate of return is 14 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Anticipated Value D1 $ D2 $ D3 $ D4 $ ________________________________________ b. Calculate the present value of each of the anticipated dividends at a discount rate of 14 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) PV of Dividends D1 $ D2 D3 D4 ________________________________________ Total $

Explanation / Answer

**PVF@i%,n= 1/(1+i)^n or can be find from present value table

**Also in question it is mention both five years and calculation is asked for four years .so calculation is made only for four years.

Year Dividend Present value factor @14% Dividend *PVF 1 3(1+.07)=3.21 .87719 2.82 2 3.21(1+.07)= 3.43 .76947 2.64 3 3.43(1+.07)= 3.67 .67497 2.48 4 3.671(1+.07)= 3.93 .59208 2.33 Present value of dividend 10.27

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