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What is the formula used in the question below? Please explain step by step. Question: Last year, Timco paid 10 million in dividends. Historically they

What is the formula used in the question below? Please explain step by step.

Question:

Last year, Timco paid 10 million in dividends. Historically they have made the dividends grow at about 4% per year. What should the total dividend be next year?

Answer:

10*(1+.04)=10.4. Hopefully you have connected this idea to the assumption used in the Gordon Growth Model we used to price stocks.

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