2. You are considering buying some shares of stock in XYZ. Company XYZ plans to pay a dividend of $2.00 next year (in other words, at the end of this year), and $2.50 in two years. You believe you can sell the stock in two years at a price of $55.00. Assume the required return for XYZ is 12% Draw a diagram of the future cashflows to you if you bought XYZ today. b. Write an equation for the price you would be willing to pay for XYZ today (=P.) 3. You own shares of PDQ. PDQ just paid a dividend of $1.50. PDQ plans to grow their dividend at a rate of 10% per year, for the next 3 years. You expect to be able to sell PDQ for $25.00 at the end of 3 years. Assume the required return for PDQ is 8% Draw a diagram of the future cashflows to you for PDQ. Write an equation for the price you think someone would pay you for PDQ today (=P.) a. b. I 4. Your rich Aunt owns preferred stock in FNCY. This preferred stock is expected to pay a dividend of $7 per share, every year, forever. She wants you to have it. In fact, she has told you that you can either wait until she passes away, when you will inherit it from her, or you could buy it from her now. It just paid its annual dividend, so the next $7 dividend payment is exactly one year from today, and then every year after that, forever. The required return for FNCY is 10%. a. Draw a diagram of the future cashflows to you for FNCY, if you bought it today. b. Write an equation for the price you think you think you should pay for FNCY today (P.) e.BONUS: Calculate the price you think you think you should pay for FNCY today (P.)