2. Dividends and stock valuesThe following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rateof 4.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but manypeople find it difficult to imagine adding up an infinite number of dividends.Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now(D 10, D20, D50). Assume that the stock's required return (rs) is 5.40%.Note: Carry and round the calculations to four decimal places.Time PeriodDividend's Expected Future ValueDividend's Expected Present ValueNowEnd of Year 10End of Year 20End of Year 50Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the FV ofa particular dividend payment will increase depending on how far from today the dividend is expected to be received.Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph tosee their coordinates. Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the FV ofa particular dividend payment will increase depending on how far from today the dividend is expected to be received.Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph tosee their coordinates.10.00Expected Dividends8.00FV of Dividends6.004.002.00PV of DividendsA102030405060YEARSDIVIDENDS ($)

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Description: 2. Dividends and stock valuesThe following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rateof 4.50% per year. The intrinsic value of a stoc

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Answered: Calculate the present value (PV) of the…

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Accounting

Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 14MC

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The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50). Assume that the stock's required return (rs) is 8.40%. Note: Carry and round the calculations to four decimal places. Time Period Now End of Year 10 End of Year 20 End of Year 50 Dividend's Expected Future Value Dividend's Expected Present Value
The following graph shows the value of a stock’s dividends over time. The stock’s current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 3.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (D₀) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50D10, D20, D50). Assume that the stock’s required return (rss) is 10.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividend’s Expected Future Value Dividend’s Expected Present Value Now ($1.000, 0.10000, 20.000, 10.000) End of Year 10 ($1.1877, 1.4106, 1.1087, 1.2723) (0.5245, 0.7242, 0.8240, 0.6365) End of Year 20 (1.6753, 2.0594,…
The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 3.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (D.) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50). Assume that the stock's required return (r) Is 10.40%. Note: Carry and round the calculations to four decimal places. Time Period Now End of Year 10 End of Year 20 End of Year 50 Using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will Illustrate how the PV of a particular dividend payment will…
The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 4.50% per year . The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10 and 20 years from now (D1g and D2g). Assume that the stock's required return (r) is 5.40 % Note: Carry and round the calculations to four decimal places. Time Period Dividend's Expected Expected Dividend's Future Value Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will…
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3. Expected dividends as a basis for stock values The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50). Assume that the stock's required return (r,) is 8.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividend's Expected Future Value Dividend's Expected Present Value Now $1.0000 End of Year 10 $1.3053 $0.7633 X End of Year 20 $1.7038 V $0.2887 X End of Year 50 $4.3289 X $0.0709 X
4. Expected dividends as a basis for stock values The following graph shows the value of a stock’s dividends over time. The stock’s current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 2.70% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (D₀) and the discounted value of the dividends expected to be paid 10, 20, and 50 years from now (D10, D20, D50D10, D20, D50). Assume that the stock’s required return (rss) is 8.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividend’s Expected Future Value Dividend’s Expected Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the orange…
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A stock’s current dividend is $1.00, and dividends are expected to grow at a constant rate of 2.70% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the PV of the dividend paid today (D0D0) and the PV of the dividends expected to be paid 10, 20, and 50 years from now (Dˆ10D^10, Dˆ20D^20, and Dˆ50D^50). Assume that the stock’s required return (rsrs) is 8.40%.
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