A firm's dividends have grown over the last several years. 3 years ago the firm paid a dividend of $1. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm? Round the answer to two decimal places in percentage form.

The average annual growth rate of dividends for this firm is 90.05%

Explanation:

In order to calculate the average annual growth rate of dividends for this firm we would to have to use the following formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

7=1*(1+r/100)^3

(7/1)^(1/3)=(1+r/100)

(1+r/100)=1.9005

r=(1.9005-1)*100

=90.05%(Approx).

The average annual growth rate of dividends for this firm is 90.05%

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