Investors expect the following series of dividends from a particular common stock: Year 1 ...... $1.10 Year

Question:

Investors expect the following series of dividends from a particular common stock:

Year 1 ...... $1.10

Year 2......$1.25

Year 3......$1.45

Year 4......$1.60

Year 5......$1.75

After the fifth year, dividends will grow at a constant rate. If the required rate of return on this stock is 9 % and the current market price is $45.64, what is the long-term rate of dividend growth expected by the market?

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...