Integrated Potato Chips paid a $2.20 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4% per year.
a. What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Expected Dividend Year 1 $ Year 2 Year 3
b. If the discount rate for the stock is 12%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Current price $
c. What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Future price $
d. If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)
d. If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Year 1 Year 2 Year 3 Dividend $ $ $ Sale of stock Total cash flow $ $ $ PV of cash flow $ $ $
| Integrated Potato Chips paid a $2.20 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4% per year. |
| a. | What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Expected Dividend | |
| Year 1 | $ |
| Year 2 | |
| Year 3 | |
| b. | If the discount rate for the stock is 12%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Current price | $ |
| c. | What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Future price | $ |
| d. | If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| d. | If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Year 1 | Year 2 | Year 3 | ||||
| Dividend | $ | $ | $ | |||
| Sale of stock | ||||||
| Total cash flow | $ | $ | $ | |||
| PV of cash flow | $ | $ | $ | |||
Related questions
| The JacksonâTimberlake Wardrobe Co. just paid a dividend of $1.10 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return of 11 percent on the company's stock. |
| What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Current price | $ |
| What will the stock price be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Stock price | $ |
| What will the stock price be in 14 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Stock price | $ |
