WACC Calculation solution, instead, someone

Jupiter

Can someone help me out and see if the solution key is wrong here.
Question:
Stock Price : 45
Last Year's Dividend: 5
Dividend Growth Rate: 8%
Cost of Debt: 9%
Tax: 35%
D/E: .4

A. 14.34
B. 15.96
C. 16.86

Solution Key B

When we use Dividend Growth model shouldn't we use D1 instead of D? So in this case D1 would be 5.832 then why is the answer B.

pacmandefense

No!
Last year's dividend is D0. You can also see D0 as today's dividend, the current dividend or the dividend just paid.

Answer: B.

koba

We always use estimated Dividend for next year. Sometimes its given, sometimes you need to calculate it by formula: D1=D0(1+g)

smartpants

why is D1 5*1.08 though shouldn't it be 5*(1.08)^2 since Last year's dividend = D-1?

LokiDog2

D1 = 5*1.08