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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
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 $ per share, and dividends are expected to
grow at a constant rate of 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 and the discounted value of the dividends expected to be paid and years
from now Assume that the stock's required return is
Note: Carry and round the calculations to four decimal places.
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