. Stock Values. Integrated Potato Chips paid $1 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4 percent per year.
a.
To calculate the future dividend amount, you can use the formula for the future value of a growing annuity. The formula is:
Future Dividend = Dividend * (1 + Growth Rate) ^ Number of Years
In this case:
Dividend = $1
Growth Rate = 4% or 0.04 (as a decimal)
Number of Years - The number of years into the future that you want to calculate the dividend value.
Let's assume you want to calculate the future dividend for 5 years. Plugging the values into the formula, you get:
Future Dividend = $1 * (1 + 0.04) ^ 5
= $1 * (1.04) ^ 5
≈ $1 * 1.21665
≈ $1.22 (rounded to the nearest cent)
Therefore, you can expect the future dividend to be approximately $1.22 per share after 5 years, assuming a steady growth rate of 4% per year.