4. Expected dividends as a basis for stock values Aa Aa The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70 % 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 (D10 and D2o). Assume that the stock's required return (r) is 8.40 %. Note: Carry and round the calculations to four decimal places. Dividend's Expected Expected Dividend's Time Period Future Value Present Value $1.0000 Now $0.5827 $1.3053 End of Year 10 $0.3395 $1.7038 End of Year 20 $0.0672 $3.7890 End of Year 50 Using the red curve (cross symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($) Discounted Dividends 5.00 4.00 FV of Dividends 3.00 Ch 09: Assignment - Stocks and Their Valuation Time Period Dividend's Expected Expected Dividend's Future Value Present Value Now $1.0000 End of Year 10 $1.3053 $0.5827 End of Year 20 $1.7038 $0.3395 End of Year 50 $3.7890 $0.0672 Using the red curve (cross symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($) 5.00 Discounted Dividends 4.00 FV of Dividends 3.00 2.00 1.00 PV of Dividends 0.00 0 30 40 50 60 10 20 YEARS Clear All Flash Player WIN 32,0,0,270 Q3 3.34.1 2004-2016 Aplia, All rights reserved. 4. Expected dividends as a basis for stock values Aa Aa The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70 % 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 (D10 and D2o). Assume that the stock's required return (r) is 8.40 %. Note: Carry and round the calculations to four decimal places. Dividend's Expected Expected Dividend's Time Period Future Value Present Value $1.0000 Now $0.5827 $1.3053 End of Year 10 $0.3395 $1.7038 End of Year 20 $0.0672 $3.7890 End of Year 50 Using the red curve (cross symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($) Discounted Dividends 5.00 4.00 FV of Dividends 3.00 Ch 09: Assignment - Stocks and Their Valuation Time Period Dividend's Expected Expected Dividend's Future Value Present Value Now $1.0000 End of Year 10 $1.3053 $0.5827 End of Year 20 $1.7038 $0.3395 End of Year 50 $3.7890 $0.0672 Using the red curve (cross symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($) 5.00 Discounted Dividends 4.00 FV of Dividends 3.00 2.00 1.00 PV of Dividends 0.00 0 30 40 50 60 10 20 YEARS Clear All Flash Player WIN 32,0,0,270 Q3 3.34.1 2004-2016 Aplia, All rights reserved
