Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.50 yesterday. Bahnsen's dividend is expected to grow at 4% 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 10%. e. Use equation below to calculate the present value of this stock. Do(1+g) D1 rs-g rs-g Assume that g 4% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. Po f. Is the value of this stock dependent upon how long you plan to hold it? In other words, if your planned holding period was 2 years or 5 years rather than 3 years, would this affect the value of the stock today, fo? I. No. The value of the stock is not dependent upon the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is equal to the value calculated in part e. Any other holding period would produce the same value of Po. II. Yes. The value of the stock is dependent the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is not equal to the value calculated in part e. Any other holding period would produce a different value of fo. III. Yes. The value of the stock is dependent upon the holding period due to the fact that the value is determined as the present value of all future expected dividends. IV. No. The value of the stock is not dependent upon the holding period unless the growth rate remains constant for the foreseeable future. V. Yes. The value of the stock is dependent upon the holding period as long as the growth rate remains constant for the foreseeable future. -Select- Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.50 yesterday. Bahnsen's dividend is expected to grow at 4% 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 10%. e. Use equation below to calculate the present value of this stock. Do(1+g) D1 rs-g rs-g Assume that g 4% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. Po f. Is the value of this stock dependent upon how long you plan to hold it? In other words, if your planned holding period was 2 years or 5 years rather than 3 years, would this affect the value of the stock today, fo? I. No. The value of the stock is not dependent upon the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is equal to the value calculated in part e. Any other holding period would produce the same value of Po. II. Yes. The value of the stock is dependent the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is not equal to the value calculated in part e. Any other holding period would produce a different value of fo. III. Yes. The value of the stock is dependent upon the holding period due to the fact that the value is determined as the present value of all future expected dividends. IV. No. The value of the stock is not dependent upon the holding period unless the growth rate remains constant for the foreseeable future. V. Yes. The value of the stock is dependent upon the holding period as long as the growth rate remains constant for the foreseeable future. -Select
