Hunter Petroleum Corporation paid a $2 dividend last year The dividend is expected to grow at a constant rate of 5 percent forever The required rate of return is 12 percent (this will also serve as the discount rate in this problem) (Use a Financial calculator to arrive at the answers ) a Compute the anticipated value of the dividends for the next three years (Do not round intermediate calculations Round the final answer to 3 decimal places ) Anticipated value D 1 $ D 2 $ D 3 $ b Calculate the present value of each of the anticipated dividends at a discount rate of 12 percent (Do not round intermediate calculations Round the final answers to 3 decimal places ) PV of dividends D 1 $ D 2 D 3 Total $ c Compute the price of the stock at the end of the third year (P 3 ) (Round intermediate calculations to 2 decimal places Round the final answer to 2 decimal places ) P 3 D 4 K e g ( D 4 is equal to D 3 times 1 05) Price of the stock $ d Calculate the present value of the year 3 stock price at a discount rate of 12 percent (Do not round intermediate calculations Round the final answer to 3 decimal places ) Price of the stock (discounted) $ e Compute the current value of the stock (Do not round intermediate calculations Round the final answer to 2 decimal places ) Current value $ f Use formula given below to show that it will provide approximately the same answer as part e (Round the final answer to 2 decimal places ) P 0 D 1 K e g For formula 108, use D 1 $2 10, K e 12 percent, and g 5 percent (The slight difference between the answers to parts e and f is due to rounding ) Current value $

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Hunter Petroleum Corporation paid a $2 dividend last year. The dividend is expected to grow at a constant rate of 5 percent forever. The required

Hunter Petroleum Corporation paid a $2 dividend last year. The dividend is expected to grow at a constant rate of 5 percent forever. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). (Use a Financial calculator to arrive at the answers.)

a. Compute the anticipated value of the dividends for the next three years. (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

	Anticipated value
D₁	$
D₂	$
D₃	$

b. Calculate the present value of each of the anticipated dividends at a discount rate of 12 percent. (Do not round intermediate calculations. Round the final answers to 3 decimal places.)

	PV of dividends
D₁	$
D₂
D₃

Total	$

c. Compute the price of the stock at the end of the third year (P₃). (Round intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

P₃	=	D₄
		K_e g

(D₄ is equal to D₃ times 1.05)

Price of the stock $

d. Calculate the present value of the year 3 stock price at a discount rate of 12 percent. (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

Price of the stock (discounted) $

e. Compute the current value of the stock. (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Current value $

f. Use formula given below to show that it will provide approximately the same answer as part e. (Round the final answer to 2 decimal places.)

P₀	=	D₁
		K_e g

For formula 108, use D₁ = $2.10, K_e = 12 percent, and g = 5 percent. (The slight difference between the answers to parts e and f is due to rounding.)

Current value $