Name: Dividend Growth Model Exercise 4. Bringing it all Together: Add the present value of the stock price expected at the end of Year 3 plus the dividends expected in Years 1, 2, and 3 to find the present value of the stock, Po. (Note that we are only concerned with future dividends and do not add Do.) 2 3 4 Year: 1.9435 2.5266 DA=2.7287 Dividend: 0 R-13.4% 1.4950 $1.3183 1.5113 $50.5310 = B = D./6.-8) 36,3838 = $39.2134 **** Note that Ds and P, are both discounted by (1+g)' They represent the same time period -> same subscript -> same discount. Therefore $53.0576/(1.134) = $36.3838 Check your answer using a financial calculator, enter the following inputs: CFO = 0; CF = 1.4950; CF2 = 1.9435; CF3 = 53.0576 = (2.5266 + 50.5310); (Punch NPV) I/YR = 13.4; and then CPT for NPV = $39.2134 . Final Answer: Po= $39.21