Jay Ritter invested $1,000 in the stock of the SDH Company. The company pays a current dividend

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Jay Ritter invested $1,000 in the stock of the SDH Company. The company pays a current dividend of $2, which is expected to grow by 20 percent per year for the next two years. What will the dividend of the SDH Company be after two years? A future value calculation gives:$2 x 1.20= $2.88

Figure 4.6 illustrates the increasing value of SDH’s dividends. The Growth of the SDH DividendsDollars $2.88 $2.40 $2.00 0 1 Time 2

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Corporate Finance

ISBN: 9781265533199

13th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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