Calculate the present value of these cash flows

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Suppose that a firm’s recent earnings per share and dividend per share are $4.00 and $3.00, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 21 seems high for this growth rate. The P/E ratio is expected to fall to 17 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your final answer to 3 decimal places.) Dividends Years First year $ 3.24 Second year $ 3.50 Third year $ 3.78 Fourth year $ 4.08 Fifth year $ 4.41 Compute the value of this stock in five years. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price $ 99.91 Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value $ 14.29

Reference no: EM132014243

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