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7. Expected dividends as a basisfor stock values A stock's current dividend is $1.00, and dividends are expected to grow at a constant rate of
7. Expected dividends as a basisfor stock values A stock's current dividend is $1.00, 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 adding up an infinite number of dividends. Calculate the PV of the dividend paid today (D0) and the PV of the dividends expected to be paid 10,20 , and 50 years from now (D10, D20, and D50 ). Assume that the stock's required return (rs) is 5.40%. 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 Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before ploting it on the grapher the points in the graph to see their coordinates.)
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