Solved: The planned dividends are 040 in one years time 050 in two, Finance Basics

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The planned dividends are 040 in one years time 050 in two

Kramer Ltd last paid a dividend of $0.20 three years ago. Today the company announced they will resume paying dividends. The planned dividends are $0.40 in one year's time, $0.50 in two years' time, and thereafter dividends will increase by a constant rate of 4% p.a. indefinitely. If the required rate of return for Kramer is 11%, what is a fair price for one share today?

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Finance Basics: The planned dividends are 040 in one years time 050 in two

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