Question

Assume a company pays out $100 in dividends in year 1. Dividends increase by 10% a year for 4 years and thereafter stay constant. What is the total amount of dividends paid out (rounded to the nearest $1) during years 1-10

Answer 1

Answer:

0.4

Explanation:

Assume a company pays out $100 in dividends in year 1. Dividends increase by 10% a year for 4 years and thereafter stay constant. What is the total amount of dividends paid out (rounded to the nearest $1) during years 1-10.

Answer 2

The total amount of dividends paid out (rounded to the nearest $1) during years 1-10 is $1,489‬

Explanation:

The company pays dividend in the 1st Year = $100

Given as dividends increase by 10% each year for the next four years, so

Company pays dividend in the 2nd Year = 100 + 100*(10/100) = $110

Company pays dividend in the 3rd Year = 110 + 110*(10/100) = $121

Company pays dividend in the 4th Year = 121 + 121*(10/100) = $133.10

Company pays dividend in the 4th Year = 133.10 + 133.10*(10/100) = $146.41

Further, the dividend remains constant until the 10th year.

The company pays dividend in the 5th Year = $146.41

The company pays dividend in the 6th Year = $146.41

The company pays dividend in the 7th Year = $146.41

The company pays dividend in the 8th Year = $146.41

The company pays dividend in the 9th Year = $146.41

The company pays dividend in the 10th Year = $146.41

By adding dividend paid amount from 1 to 10th year we will get the total paid amount.

So, the total amount of dividends paid out during years 1-10 is $1,488.97‬

So, the total amount of dividends paid out (rounded to the nearest $1) during years 1-10 is $1,489‬