8-19 Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a divi- ant growth stock dend of $2 yesterday. You expect the dividend to grow at the rate of 5 percent per year for the valuation next 3 years, and, if you buy the stock, you plan to hold it for 3 years and then sell it. a. Find the expected dividend for each of the next 3 years; that is, calculate D, Dz, and D, Note that Do = $2.00. b. Given that the appropriate discount rate is 12 percent and that the first of these dividend payments will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PV of D, D2, and D, and then sum these PVs. c. You expect the price of the stock 3 years from now to be $34.73; that is, you expect to equal $34.73. Discounted at a 12 percent rate, what is the present value of this expected future stock price? In other words, calculate the PV of $34.73. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $34.73, what is the most you should pay for it today? c. Use Equation 8-2 to calculate the present value of this stock. Assume that g = 5%, and it is constant f. Is the value of this stock dependent upon how long you plan to hold it? In other words, if your planned holding period were 2 years or 5 years rather than 3 years, would this affect the value of the stock today, Po? 8-20 Invest