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Please help me answer all parts of the question, I am extremely confused. Thank you. Problem 7-12 Dividend Discount Model (LO2) Integrated Potato Chips just
Please help me answer all parts of the question, I am extremely confused. Thank you.
Problem 7-12 Dividend Discount Model (LO2) Integrated Potato Chips just paid a $1 per share dividend. You expect the dividend to grow steadily at a rate of 4% per year. a. What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year 1 Year 2 Year 3 Expected Dividend $ 1.04 1.08 1.12 b. If the discount rate for the stock is 12%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current price $ 13.00 c. What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Future price $ 14.62 d. If you buy the stock and plan to sell it 3 years from now, what are your expected cash flows in (i) year 1; (ii) year 2; (iii) year 3? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year 1 Year 2 Year 3 Dividend $ 1.04 $ 1.08 $ 1.12 Sale of stock 14.56 Total cash flow $ 1.04 $ 1.08 $ 15.68 e. What is the present value of the stream of payments you found in part (d)? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year 1 Year 2 Year 3 PV of cash flowStep by Step Solution
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