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Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $4.00 yesterday. Bahnsen's dividend is expected
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $4.00 yesterday. Bahnsen's dividend is expected to grow at 8% 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 13%.
- Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that D0 = $4.00. Do not round intermediate calculations. Round your answers to the nearest cent. D1 = $ D2 = $ D3 = $
- 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. $
- You expect the price of the stock 3 years from now to be $108.84; that is, you expect to equal $108.84. Discounted at a 13% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $108.84. Do not round intermediate calculations. Round your answer to the nearest cent. $
- If you plan to buy the stock, hold it for 3 years, and then sell it for $108.84, what is the most you should pay for it today? Do not round intermediate calculations. Round your answer to the nearest cent. $
- Use equation below to calculate the present value of this stock. Assume that g = 8% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. $
Your broker offers to sell you some shares of Bahnsen \& Co. common stock that paid a dividend of $4.00 yesterday, Bahnsen's dividend is expected to grow at 8% 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 13%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1,D2, and D2, Note that D0=$4,00. Do not round intermediate calculations. Round your answers to the nearest cent. D1=$D2=$D3=$ 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 $108.84; that is, you expect P^3 to equal $108.84. Discounted at a 13% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $108.84. Do not round intermediate calculations. Round your answer to the nearest cent. 5 d. If you plan to buy the stock, hold it for 3 years, and then sell it for $108.84, what is the most you should pay for it today? Do not round intermediate calculations, Round your answer to the nearest cent. 5 e. Use equation below to calculate the present value of this stock. P^0=r3gD0(1+z)=rg8gD1 Assume that g=8% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. $
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