Suppose that a firms recent earnings per share and dividend per share are $3.90 and $2.90, respectively. Both are expected to grow at 7 percent. However, the firms current P/E ratio of 20 seems high for this growth rate. The P/E ratio is expected to fall to 16 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

$3.10

Second year

$3.32

Third year

$3.55

Fourth year

$3.80

Fifth year

$4.07

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

$87.52

Calculate the price of this stock today, including all six cash flows at discount rate of 9 percent.

Present value

$ ?