Atlas Bearings has adopted a policy of increasing the annual dividend on its ordinary shares at a constant rate of 2.75 percent annually.  The firm just paid an annual dividend of $1.67.  What will the dividend be six years from now?



To find the dividend six years from now, we can use the formula for the future value of a dividend growing at a constant rate:

\[
D_t = D_0 \times (1 + g)^t
\]

Where:
- $ D_t $ is the dividend at time $ t $ (in 6 years).
- $ D_0 $ is the most recent dividend paid (currently $1.67$).
- $ g $ is the annual growth rate of the dividend (2.75% or 0.0275).
- $ t $ is the number of years (6 years in this case).

Now let's calculate the future dividend:

\[
D_6 = 1.67 \times (1 + 0.0275)^6
\]

Let's compute this.The dividend six years from now will be approximately **$1.97**.

Would you like further details or have any questions? Here are some related questions you might consider:

1. How would the dividend change if the growth rate increased to 3%?
2. What would be the dividend after 10 years instead of 6 years?
3. How do varying growth rates affect long-term dividend forecasts?
4. How does this growth rate compare to inflation, and what does that mean for shareholders?
5. How can investors use dividend growth to estimate the value of a stock?

**Tip:** Understanding dividend growth can help you evaluate the potential long-term returns from a stock investment.

Atlas Bearings has adopted a policy of increasing the annual dividend on its ordinary shares at a constant rate of 2.75 percent annually. The firm just paid an annual dividend of $1.67. What will the dividend be six years from now?

Learn how to calculate the future dividend for Atlas Bearings, assuming a 2.75% annual growth rate. Starting with a current dividend of $1.67, this example demonstrates the use of the exponential growth formula to estimate dividends after 6 years. Ideal for finance and business students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation