a company pays out $100 in dividends in Year 1. increase by 10% a year for 4 years and thereafter stay constant. What is total amountpaid out durin 1-10?

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

Year 1: $100

 

For the next four years, the dividends increase by 10% each year:

 

Year 2: (100)(1.1) = $110

Year 3: (110)(1.1) = $121

Year 4: (121)(1.1) = $133.10

Year 5: (133.1)(1.1) = $146.41

 

After that, the dividends stay constant:

 

Year 6: $146.41

Year 7: $146.41

Year 8: $146.41

Year 9: $146.41

Year 10: $146.41

 

Add those ten values together and round to the nearest dollar to get your answer.