Problem 5 (See Pages 260 261)

Peter Smith invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 10 percent is applied? (Round all values to two places to the right of the decimal point.). PLEASE SHOW YOUR WORK