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In my Fundamentals of Corporate Finance book is the following pargraph,

The TICO Corporation currently pays a cash dividend of $5 per share. You believe the dividend will be increased by 4 percent each year indefinitely. How big will the dividend be in eight years?

I don't understand why they used the simple future passive here instead of just the simple future, that is

You believe the dividend will increase by 4 percent each year.

Is there a reason for using one of the two and not the other?

Also just to make sure that my understanding is correct that saying in the simple future passive sentence "by 4 percent" it is not the subject of the sentence, the subject of this sentence is omitted. Right?

  • More context, please. Why don't you quote the entire paragraph rather than just one sentence. – Ricky Dec 24 '15 at 3:38
  • Regarding the subject, you can look at it this way: "You believe (that the dividend will increase by 4 percent each year). – user3169 Dec 24 '15 at 4:02
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    "Increase" is both [transitive, intransitive], so the "by 4 percent" is obviously an adverb. I think using passive voice makes us able to concentrate on the object rather other parts and It is clear and easy to understand in academic textbooks. (personal idea) – Cardinal Dec 24 '15 at 8:19
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The construction "will be increased by" emphasises the fact that some individual or small group makes the decision about the amount of the increase, and that if they decide that the dividend will increase by 4% each year for 8 years, then the dividend will indeed increase by exactly 4% for each of those years, unless the company somehow runs out of money (or they change their mind, of course).

On the other hand, saying "will increase by" could refer to an approximate amount that is measured; nobody is choosing the exact value. For example, if you said that a company increased profits by 4% a year for 8 years, it would be very unlikely in the real world that it was exactly 4% each and every year. It could be 3.95% or 4.05% and that is still near enough that nobody will quibble that your prediction was wrong.

In this case, using the passive voice in the question, they are telling you that you can simply do the mathematics about compound interest, without needing to worry about what might happen if the numbers weren't exactly 4% for every one of the 8 years the question refers to.

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