Cost of capital nov 2016,ipc question

Ke = (DPS / Price*100) + Growth Rate

Ke = (4/40*-100)+8

Ke = 10+8

Ke = 18%

I think Rs 4 given for DPS is not D0 but it's D1. because the words used in the problem are "it is expected that a dividend of Rs 4 would be declared", so it should be treated as D1

Yes.In my view too it should be treated as D1 .But ICAI suggested answers it has been treated as D0.