PerfectlySoft Corp. is experiencing rapid growth. Dividends are expected to grow

Question

PerfectlySoft Corp. is experiencing rapid growth. Dividends are expected to grow at 20 percent per year during the next three years, 15 percent over the following year, and then 8 percent per year thereafter indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $69.8 per share. What is the projected dividend for the coming year?

PerfectlySoft Corp. is experiencing rapid growth. Dividends are expected to grow at 20 percent per year during the next three years, 15 percent over the following year, and then 8 percent per year thereafter indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $69.8 per share. What is the projected dividend for the coming year?

Explanation / Answer

the stock is now trading at $69.8 and the expected dividend is 20%

i.e. 20% on $69.8

= 69.8 X0.2= $13.96

the expected dividend for the coming year is $13.96

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