Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I am really confused by all of it, any help is appreciated The following graph shows the value of a stock's dividends over time. The

image text in transcribed

I am really confused by all of it, any help is appreciated

The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 3.50% 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 to imagine adding up an infinite number of dividends. Calculate the present value (PV) or the dividend paid today (Da) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D., D2,Dge). Assume that the stock's required retum (rs) is 10.40%. Note: Carry and round the calculations to four decimal places. Dividend's Expected Future Value Dividend's Expected Present Value Time Period Now End of Year 10 End of Year 20 End of Year 50 Using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. 8.00 O . FV of Dividends Discounted Dividends DIVIDENDS (S) 3700 2.00 O 1.00 PV of Dividends 0 0 10 20 40 50 30 YEARS

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

An Introduction To Financial Markets A Quantitative Approach

Authors: Paolo Brandimarte

1st Edition

1118014774, 9781118014776

More Books

Students also viewed these Finance questions