Question 2:

A firm reported earning per shares of $ 2 in the most recent year (Year 2020). Earnings are expected to grow at a rate of 10% for the next five years, and a constant rate of 5% for thereafter, in perpetuity. The dividend payout ratio in 2020was 50% and is expected to increase linearly over the following ten years to reach a steady payout ratio of 80% at the end of 2030. Based on information given, estimate the dividend per share paid at the end of 2026 (pick the closest).

2.10

2.20

2.30

2.40

answer is 2.30