Weston Corporation just paid a dividend of $\$1.25$ a share (i.e., $D_0 = \$1.25$ ). The dividend is expected to grow $8\%$ a year for the next $3$ years and then at $3\%$ a year thereafter. What is the expected dividend per share for each of the next $5$ years? Do not round intermediate calculations. Round your answers to the nearest cent.

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Q. Weston Corporation just paid a dividend of

\$1.25

a share (i.e.,

D_0 = \$1.25

). The dividend is expected to grow

8\%

a year for the next

3

years and then at

3\%

a year thereafter. What is the expected dividend per share for each of the next

5

years? Do not round intermediate calculations. Round your answers to the nearest cent.

Calculate D $1$ : Calculate the expected dividend for the first year (D $1$ ). $\newline$ The dividend is expected to grow by $8$ \% a year for the next $3$ years. The formula to calculate the dividend for the first year is: $\newline$ $D_1 = D_0 \times (1 + g)$ , where $D_0$ is the dividend just paid, and $g$ is the growth rate. $\newline$ $D_1 = \$1.25 \times (1 + 0.08)$ $\newline$ $D_1 = \$1.25 \times 1.08$ $\newline$ $D_1 = \$1.35$
Calculate D $2$ : Calculate the expected dividend for the second year (D $2$ ). The dividend will continue to grow at $8$ % for the second year. The formula to calculate the dividend for the second year is: $D2 = D1 \times (1 + g)$ $D2 = \$1.35 \times (1 + 0.08)$ $D2 = \$1.35 \times 1.08$ D$2$ = \$$1$.$458$
Calculate D$3$: Calculate the expected dividend for the third year (D$3$). The dividend will grow at $8$% for the third year as well. The formula to calculate the dividend for the third year is: $D_3 = D_2 \times (1 + g)$ $D_3 = \$(1.458) \times (1 + 0.08)$ $D_3 = \$(1.458) \times 1.08$ D_3 = \$1$.$57464$
Calculate D$4$: Calculate the expected dividend for the fourth year (D$4$).$\newline$After the third year, the dividend growth rate changes to $3$%. The formula to calculate the dividend for the fourth year is:$\newline$$D4 = D3 \times (1 + g_{\text{new}})$, where $g_{\text{new}}$ is the new growth rate.$\newline$$D4 = \$1.57464 \times (1 + 0.03)$$\newline$$D4 = \$1.57464 \times 1.03$$\newline$$D4 = \$1.62188$
Calculate D$5$: Calculate the expected dividend for the fifth year (D$5$). The dividend will continue to grow at $3$% for the fifth year. The formula to calculate the dividend for the fifth year is: $D5 = D4 \times (1 + g_{\text{new}})$ $D5 = \$(1.62188) \times (1 + 0.03)$ $D5 = \$(1.62188) \times 1.03$ D $5$ = \$($1$.$67054$)