Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.00 yesterday. Bahnsen's dividend is expected to grow at 5% 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 11%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that Do = $3.00. Do not round intermediate calculations. Round your answers to the nearest cent. D: -$ 3.15 D2 - $ 3.31 D3 - $ 3.47 O 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. 8.06 O c. You expect the price of the stock 3 years from now to be $60.78; that is, you expect Ps to equal $60.78. Discounted at an 11% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $60.78. Do not round intermediate calculations. Round your answer to the nearest cent. 24 44.44
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.00 yesterday. Bahnsen's dividend is expected to grow at 5% 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 11%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that Do = $3.00. Do not round intermediate calculations. Round your answers to the nearest cent. D: -$ 3.15 D2 - $ 3.31 D3 - $ 3.47 O 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. 8.06 O c. You expect the price of the stock 3 years from now to be $60.78; that is, you expect Ps to equal $60.78. Discounted at an 11% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $60.78. Do not round intermediate calculations. Round your answer to the nearest cent. 24 44.44
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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