4. Expected dividends as a basis for stock values The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 4.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50). Assume that the stock's required return (r.) is 5.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the FV of a particular dividend payment will increase depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. 10.00 Expected Dividends 8.00 FV of Dividends DIVIDENDS ($) PV of Dividends 0 10 20 30 YEARS 40 50 60 Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 $1.4861 $1.2462 Using the blue curve $1.5530 bols), plot bols), plot the future value of each of the expected future dividends for years 10, 20, and illustrate how the FV ular dividend payment will increase depending on how far from today the dividend is expe $1.1412 Note: Round each o Inted values of the dividends to the nearest tenth decimal place before plotting it on the points in the graph to see their coordinates. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 $2.5202 Using the blue curve $2.1134 bols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting illustrate how the FM ular dividend payment will increase depending on how far from today the dividend is expected to be receive $1.9353 nted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mou points in the graph tl coordinates. Note: Round each $2.4117 Dividend's Expected Future Value Dividend's Expected Present Value Time Period Now End of Year 10 End of Year 20 End of Year 50 Using the blue curve illustrate how the FV $9.0326 ols), plot the future value of each of the expected future dividends for years 10, 20 $8.6437 Jar dividend payment will increase depending on how far from today the dividend is $7.9153 hted values of the dividends to the nearest tenth decimal place before plotting it on Note: Round each o points in the graph t oordinates. $10.3077 Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 $20.0000 End of Year 20 End of Year 50 $1.0000 $0.0000 Using the blue curve (circle symbols), plot the future value of expected future dividends for years 10, 20, and illustrate how the FV of a particular dividend payment will ind $0.1000 ding on how far from today the dividend is expe Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the g points in the graph to see their coordinates. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 $0.9746 End of Year 50 $0.9257 Using the blue curve (circle symbols), plot the future value of 20 e expected future dividends for years 10, illustrate how the FV of a particular dividend payment will ind nding on how far from today the dividend $0.9580 Note: Round each of the discounted values of the dividends Jest tenth decimal place before plotting it points in the graph to see their coordinates. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 $0.8644 Using the blue curve (circle symbols), plot the future value of $0.8424 le expected future dividends for years 1 illustrate how the FV of a particular dividend payment will ind $0.8352 o or Inding on how far from today the divider Note: Round each of the discounted values of the dividends $0.8793 to zost tenth decimal place before plotting i points in the graph to see their coordinates. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the blue curve (circle symbols), plot the future value of $0.6569 le expected future dividends for years 10, 20, and illustrate how the FV of a particular dividend payment will ind $0.6513 nding on how far from today the dividend is expe $0.6348 jest tenth decimal place before plotting it on the 9 Note: Round each of the discounted values of the dividends points in the graph to see their coordinates. $0.6683