Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at a constant rate of 5 percent over the next four years. The required rate of return is 16 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the anticipated value of the dividends for the next four years. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Anticipated Value D1 D2 D3 D4 b. Calculate the present value of each of the anticipated dividends at a discount rate of 16 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) PV of Dividends D1 D2 D3 D4 Total c. Compute the price of the stock at the end of the fourth year (Pa). (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price at Year 4 d. Calculate the present value of the year 4 stock price at a discount rate of 16 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value of Year 4 stock price e. Compute the current value of the stock. (Do not round intermediate cealculations. Round your final answer to 2 decimal places.) Current value f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) D1 Pe Ke g Current value g. If current EPS were equal to $5.51 and the P/E ratio is 20% higher than the industry average of 6, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price h. By what dollar amount is the stock price in part g different from the stock price in part f (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Amount i. With regard to the stock price in part f indicate which direction it would move if: (1) D1 increases (2) Ke increases (3) g increases Present value of $1, PV Appendix B PV= FV + Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.961 0.873 2 0.980 0.943 0.925 0.907 0.890 0.857 0.842 0.826 0.812 0.797 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.95 0.68 0.906 0.863 0.822 0.784 0.747 0.713 0.650 0.621 0.593 0.567 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.933 0.513 7 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.482 0.452 0.731 0.627 8 0.923 0.853 0.789 0.677 0.582 0.540 0.502 0.467 0.434 0.404 0.460 0.837 0.766 0.592 0.500 0.424 0.391 0.361 0.914 0.703 0.645 0.544 0.820 0.744 0.558 0.322 10 0.905 0.676 0.614 0.508 0.463 0.422 0.386 0.352 0.429 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.388 0.350 0.317 0.287 0.887 0.444 12 0.788 0.701 0.625 0.557 0.497 0.397 0.356 0.319 0.286 0.257 0.601 0.368 13 0.879 0.773 0.681 0.530 0.469 0.415 0.326 0.290 0.258 0.229 0.661 0.340 0.263 14 0.870 0.758 0.577 0.505 0.442 0.388 0.299 0.232 0.205 0.642 15 0.861 0.743 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.163 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.350 18 0.836 0.700 0.587 0.494 0.416 0.296 0.250 0.212 0.180 0.153 0.130 0.828 0.116 19 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.820 0.312 20 0.673 0.554 0.456 0.377 0.258 0.215 0.178 0.149 0.124 0.104 0.116 0.059 25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.092 0.074 0.033 30 0.742 0.552 0.412 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.208 0.067 0.015 40 0.672 0.453 0.307 0.142 0.097 0.046 0.032 0.022 0.011 0.608 0.021 50 0.372 0.228 0.141 0.087 0.054 0.034 0.013 0.009 0.005 0.003 Appendix B (concluded) Present value of $1 Percent 20 % 15% 35% Period 13% 14% 16% 17% 18% 19% 25% 30% 40% 50% 0.885 0.862 0.833 1 0.877 0.870 0.855 0.847 0.840 0.800 0.769 0.741 0.714 0.667 0.706 0.640 2 0.783 0.769 0.756 0.743 0.731 0.718 0.694 0.592 0.549 0.510 0.444 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.512 0.455 0.406 0.364 0.296 0.534 0.350 4 0.613 0.592 0.572 0.552 0.515 0.499 0.482 0.410 0.301 0.260 0.198 0.437 5 0.543 0.519 0.497 0.476 0.456 0.419 0.402 0.328 0.269 0.223 0.186 0.132 0.352 6 0.480 0.456 0.432 0.410 0.390 0.370 0.335 0.262 0.207 0.165 0.133 0.088 0.296 0.059 7 0.425 0.400 0.376 0.354 0.333 0.314 0.279 0.210 0.159 0.122 0.095 0.35 0.376 0.327 0.305 0.285 0.266 0.249 0.233 0.168 0.123 0.091 0.068 0.039 0.308 0.243 0.333 0.284 0.263 0.225 0.209 0.194 0.134 0.094 0.067 0.048 0.026 0.208 0.017 10 0.295 0.270 0.247 0.227 0.191 0.176 0.162 0.107 0.073 0.050 0.035 0.237 0.215 0.086 0.037 0.012 11 0.261 0.195 0.178 0.162 0.148 0.135 0.056 0.025 0.208 0.027 0.008 12 0.231 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0.043 0.018 0.182 0.163 13 0.204 0.145 0.130 0.116 0.104 0.093 0.055 0.033 0.020 0.013 0.005 0.160 0.141 0.025 0.009 14 0.181 0.125 0.111 0.099 0.088 0.078 0.044 0.015 0.003 15 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.011 0.006 0.002 0.081 0.071 0.005 16 0.141 0.123 0.107 0.093 0.062 0.054 0.028 0.015 0.008 0.002 0.060 0.023 0.012 0.001 17 0.125 0.108 0.093 0.080 0.069 0.052 0.045 0.006 0.003 0.044 0.009 0.005 18 0.111 0.095 0.081 0.069 0.059 0.051 0.038 0.018 0.002 0.001 0.031 0.007 19 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.014 0.003 0.002 0.073 0.051 0.037 0.031 0.026 20 0.087 0.061 0.043 0.012 0.005 0.002 0.001 0.038 0.030 0.024 0.001 25. 0.047 0.020 0.016 0.013 0.010 0.004 0.001 C 30 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.001 40 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0 0.001 50 0.002 0.001 0.001 0 0 0 0 0 0 ooo o ooO o ooO O O O O O LO