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Warr Corporation just paid a dividend of $1

Finance

Warr Corporation just paid a dividend of $1.5 a share. The dividend is expected to grow 8.40% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 4 years?

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Given Information

Dividend just paid (D0) = $1.5 per share

Dividend growth for next 3 years (g1) = 8.40% a year

Dividend growth after 3rd year (g2) = 5%

Dividend next year (D1) = D0*(1+g1) = 1.5*(1+0.084) = 1.63

Dividend in 2nd year (D2) = D1*(1+g1) = 1.63*(1+0.084) = 1.76

Dividend in 3rd year (D3) = D2*(1+g1) = 1.76*(1+0.084) = 1.91

Dividend in 4th year (D4) = D3*(1+g2) = 1.91*(1+0.084) = 2.01

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