Grandiose Growth has a dividend growth rate of 20%. The discount rate is 10%. The end-of-year dividend

Question:

Grandiose Growth has a dividend growth rate of 20%. The discount rate is 10%. The end-of-year

dividend will be $2 per share.

a. What is the present value of the dividend to be paid in year 1? Year 2? Year 3?

b. Could anyone rationally expect this growth rate to continue indefinitely?

Dividend growth rate..20.00%

Discount rate......10.00%

End-of-year dividend..$2.00

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...