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Stock Evaluation: Dividends

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The Reading Co. has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3% annually. The last dividend it paid was $0.90 a share. What will the company's dividend be in six years?

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Solution Preview

This is essentially a compounding interest problem. The formula to use to solve this problem is:

Future Dividend = Current ...

Solution Summary

This solution provides a simple illustration of compounding interest using dividends as the example.