3. Expected dividends as a basis for stock values The following graph shows the value of a stocks dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 3.50% per year. The intrinsic value of a stock should equal the sum of the present value (Pv) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10 and 20 years from now (Dio and D20). Assume that the stock's required return (r) is 10.40%. Note: Carry and round the calculations to four decimal places Time Period Dividend's Expected Expected Dividend's Future Value lPresent Value Now End of Year 10U End of Year 50 N End of Year 20 using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and so. The resulting curve will ilustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. Using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will ilustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plottingit on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS IS 6.00 Discounted Dividends FV of Dividends 5.00 4.00 3.00 2.00 10, 14 1.00 PV of Dividends 0.00 0 10 20 30 4050 60 YEARS tthur uetimal place before uJl boel the points in the graph to see their coordinates DIVIDENDS ISI 6.00 Discounted Dividends FV of Dividends 5.00 4.00 3.00 20, 2.0 2.00 1.00 PV of Dividends 0.00 0 1020 30 4050 60 YEARS pum I Lie graph to see their coordinates. DIVIDENDS I$) 6.00 50, 5.6 Diunted Dividends FV of Dividends 5.00 4.00 3.00 2.00 1.00 PV of Dividends 0.00 0 10 20 30 4050 60 YEARS