Your broker offers to sell you some shares of Bahnsen & Co$.$ common stock that paid a dividend of $$3\mathrm{.}25$ 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 $12\%.$

a$.$ Find the expected dividend for each of the next $3$ years; that is$,$ calculate $D_1,D_2,$ and $D_3.$ Note that $D_0=$$$3\mathrm{.}25.$ Do not round

intermediate calculations. Round your answers to the nearest cent.

$D_1=$$

$D_2=$$

$D_3=$$

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 $D_1,D_2,$ and $D_3,$ and then sum these PVs$.$ Do not round intermediate calculations. Round your answer to the nearest cent.

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c$.$ You expect the price of the stock $3$ years from now to be $$110\mathrm{.}54$; that is$,$ you expect widehat$(P{)}_3$ to equal $$110\mathrm{.}54.$ Discounted at a $12\%$ rate,

what is the present value of this expected future stock price? In other words, calculate the PV of $$110\mathrm{.}54.$ Do not round intermediate

calculations. Round your answer to the nearest cent.

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d$.$ If you plan to buy the stock, hold it for $3$ years, and then sell it for $$110\mathrm{.}54,$ what is the most you should pay for it today? Do not

round intermediate calculations. Round your answer to the nearest cent.

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e$.$ Use equation below to calculate the present value of this stock.

widehat$(P{)}_0=\frac{D_0(1+8)}{r_S-g}=\frac{D_1}{r_S-g}$

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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