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 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%. a. 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=$D3=$ 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 PV s 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 $77.99; that is, you expect P3 to equal $77.99. Discounted at a 10% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $77.99. Do not round intermediate calculations. Round your answer to the nearest cent. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $77.99, what is the most you should pay for it today? Do not round intermediate calculations. Round your answer to the nearest cent. $ e. Use equation below to calculate the present value of this stock. P0=rsgD0(1+g)=rSgD1 Assume that g=4% 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 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%. a. 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=$D3=$ 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 PV s 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 $77.99; that is, you expect P3 to equal $77.99. Discounted at a 10% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $77.99. Do not round intermediate calculations. Round your answer to the nearest cent. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $77.99, what is the most you should pay for it today? Do not round intermediate calculations. Round your answer to the nearest cent. $ e. Use equation below to calculate the present value of this stock. P0=rsgD0(1+g)=rSgD1 Assume that g=4% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent. $
