12. Dividend Discount Model. Integrated Potato Chips just paid a $1 per share dividend. You expect the dividend to grow steadily at a rate of 4% per year. () LO72 ) a. What is the expected dividend in each of the next 3 years? b. If the discount rate for the stock is 12%, at what price will the stock sell? c. What is the expected stock price 3 years from now? d. If you buy the stock and plan to sell it 3 years from now, what are your expected cash flows in (i) year 1; (ii) year 2; (iii) year 3 ? e. What is the present value of the stream of payments you found in part (d)? Compare your answer to part (b). a. Div1 =$11.04=$1.04 Div2 =$11.042=$1.0816 Div3 =$11.043=$1.1249 b. d. SUM all the cash flow P0=DIV1/(rg)=???? e. PV of a stream of payments. LAST c. P3=DIV4/(rg)=??? WEEK LECTURE