O Your broker offers to sell you some shares of Bahnsen & Co. common stock that...
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O Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.75 yesterday. Bahnsen's dividend is expected to grow at 6% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 12%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and Ds. Note that Do $3.75. Do not round intermediate calculations. Round your answers to the nearest cent. D-$ D2-$ Dy - $ b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Do not round intermediate calculations. Round your answer to the nearest cent. $ c. You expect the price of the stock 3 years from now to be $78.90; that is, you expect P, to equal $78.90. Discounted at a 12% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $78.90. Do not round intermediate calculations. Round your answer to the nearest cent. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $78.90, what is the most you should pay for it today? Do not round intermediate calculations. Round your answer the nearest cent. $ e. Use equation below to calculate the present value of this stock. Po Do(+2) D - Assume that g 6% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. $ O Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.75 yesterday. Bahnsen's dividend is expected to grow at 6% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 12%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and Ds. Note that Do $3.75. Do not round intermediate calculations. Round your answers to the nearest cent. D-$ D2-$ Dy - $ b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Do not round intermediate calculations. Round your answer to the nearest cent. $ c. You expect the price of the stock 3 years from now to be $78.90; that is, you expect P, to equal $78.90. Discounted at a 12% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $78.90. Do not round intermediate calculations. Round your answer to the nearest cent. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $78.90, what is the most you should pay for it today? Do not round intermediate calculations. Round your answer the nearest cent. $ e. Use equation below to calculate the present value of this stock. Po Do(+2) D - Assume that g 6% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. $
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