Grandiose Growth has a dividend growth rate of 10%. The discount rate is 8%. The end-of-year dividend will be $5 per share.

Grandiose Growth has a dividend growth rate of 10%. The discount rate is 8%. The end-of-year dividend will be $5 per share.

a.	What is the present value of the dividend to be paid in year 1? Year 2? Year 3? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Present Value
Year 1	$
Year 2
Year 3

Explanation:

a.

DIV1 = $5.00	PV = $5/1.08 = $4.63
DIV2 = $5(1.10) = $5.50	PV = $5.50/1.082 = $4.72
DIV3 = $5(1.10)2 = $6.05	PV = $6.05/1.083 = $4.80