Question

Far West Trading expects to pay an annual dividend of $1.75 per share next year. What is the anticipated dividend for Year 3 if the firm increases its dividend by 3 percent annually

Answer 1

Answer:

$1.75 × (1.03)^2

Explanation:

The computation of the anticipated dividend for the year 3 if the dividend is increased by 3 percent

As we know that

Future value = Present value × (1 + rate of interest)^number of years  

= $1.75 × (1 + 3%)^2

= $1.75 × (1 + 0.03)^2

= $1.75 × (1.03)^2

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

And, the same is to be considered