[erok72]

Hi everyone,

This is my first post here, so hopefully I'm doing this correctly.

I have a Finance homework problem that I've been pulling my hair out over... :confused: Hopefully someone can walk me through the steps to find the answer.

Here's the scenario - Grandiose Growth has a dividend growth rate of 20%. The discount rate is 10%. The end-of-year dividend will be $2/share.

I need help getting the answer to to following question -

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

Thanks in advance for your help!

[reinsuranc]

In year 1 the dividend is 2. Its PV is 2/1.1

In year to the dividend is 2*1.2. Its PV is (2*1.2)/(1.1^2)

In year 3 the dividend is 2*(1.2^2). Its PV is 2*(1.2^2)/(1.1^3).