Suppose that a firms recent earnings per share and dividend per share are $2.20 and $1.20, respectively. Both are expected to grow at 10 percent. However, the firms current P/E ratio of 21 seems high for this growth rate. The P/E ratio is expected to fall to 17 within five years.

Compute the dividends over the next five years. (Do not round intermediate calculations and round your final answers to 3 decimal places.) Dividends Years

First year $

Second year $

Third year $

Fourth year $

Fifth year $

Compute the value of this stock in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Stock price $

Calculate the price of this stock today, including all six cash flows at discount rate of 12 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Present value $