3. Integrated Potato Chips just paid a $2.50 per share dividend. You expect the dividend to grow steadily at a rate of 2% per year.

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 (the stock price after third dividend payment)?

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 cash flows you found in part (d)? Compare your answer to part (b).