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Answer: $0.10.
## Explanation **Lintner Model Calculation**: The Lintner model suggests that companies adjust dividends gradually toward a target payout ratio. The formula is: **Expected Dividend Increase = Adjustment Factor × (Target Payout Ratio × Current EPS - Previous Dividend)** Where: - Adjustment Factor = 1 / Number of years in adjustment period - Previous Dividend = Previous EPS × Previous Payout Ratio **Step-by-step calculation**: 1. Previous Dividend = $2.00 × 30% = $0.60 2. Target Dividend = $2.50 × 36% = $0.90 3. Adjustment Factor = 1 / 3 = 0.3333 4. **Expected Dividend Increase = 0.3333 × ($0.90 - $0.60) = 0.3333 × $0.30 = $0.10** Therefore, the expected increase in the current year dividend per share is $0.10.
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An analyst gathers the following information about a company with a stable dividend policy:
$2.00$2.50If the company uses a 3-year period to adjust its dividends, the expected increase in the current year dividend per share should be:
A
$0.10.
B
$0.20.
C
$0.30.