Author Question: Dividend growth rate is important to many investors. You are considering investing in a firm after ... (Read 18 times)

jessicacav · **on:** Jul 10, 2018

Dividend growth rate is important to many investors. You are considering investing in a firm after looking at the firm's dividends over a seven-year period. At the end of the year 2002, the firm paid a dividend of 1.15.

At year-end 2009, it paid a dividend of 1.84. What was the average annual growth rate of dividends for this firm?
A) 7.25
B) 9.86
C) 6.94
D) There is not enough information to answer this question.

Question 2

Simpson Construction had sales seven years ago of 2,150,000. This year their sales hit 4,600,000. What has been Simpson's average annual rate of growth of sales?

A) 30.56
B) 11.48
C) 350,000 per year
D) None of the above

quynhmickitran · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: C
Explanation: C) r = (FV/PV)1/n - 1 = (1.84/1.15)1/7 - 1 = 6.94
MODE = END
INPUT 7 ? -1.15 0 1.84
KEY N I/Y PV PMT FV
CPT 6.94

Answer to Question 2

Answer: B
Explanation: B) r = (FV/PV)1/n - 1 = (4,600,000/2,150,000)1/7 - 1 = 11.48
MODE = END
INPUT 7 ? -2,150,000 0 4,600,000
KEY N I/Y PV PMT FV
CPT 11.48