Find the expected dividend for each of the next three years

Assignment Help Financial Management

Reference no: EM131887108

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 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%.

Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that D0 = $3.00. Round your answer to the nearest cent.

D1 = $

D2 = $

D3 = $

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. Round your answer to the nearest cent. Do not round your intermediate calculations.

You expect the price of the stock 3 years from now to be $102.04; that is, you expect to equal $102.04. Discounted at a 12% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $102.04. Round your answer to the nearest cent. Do not round your intermediate calculations.

If you plan to buy the stock, hold it for 3 years, and then sell it for $102.04, what is the most you should pay for it today? Round your answer to the nearest cent. Do not round your intermediate calculations.

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

Assume that g = 8% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent.

Is the value of this stock dependent upon how long you plan to hold it? In other words, if your planned holding period was 2 years or 5 years rather than 3 years, would this affect the value of the stock today, ?

Yes. The value of the stock is dependent upon the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is not equal to the value calculated in part e. Any other holding period would produce a different value of .

Yes. The value of the stock is dependent upon the holding period due to the fact that the value is determined as the present value of all future expected dividends.

No. The value of the stock is not dependent upon the holding period unless the growth rate remains constant for the foreseeable future.

Yes. The value of the stock is dependent upon the holding period as long as the growth rate remains constant for the foreseeable future.

No. The value of the stock is not dependent upon the holding period. The value calculated in parts a through d is the value for a 3-year holding period. It is equal to the value calculated in part e. Any other holding period would produce the same value of.

Reference no: EM131887108

Questions Cloud

Time the sample average mathematics score : 10% of the time the sample average Mathematics score should be less than what?

What emotional connection is there to the using-behavior : What emotional connection is there to the using/behavior? Define and describe your personal standards of behavior for alcohol and drug use.

Examining two advantages of hardware vpns : Examining two advantages of hardware VPNs and two advantages of software VPNs.

Determine the inter quartile range : Determine the Inter Quartile range (IQR) for the average age of the residents of this County. Please explain how you derived your answer:

Find the expected dividend for each of the next three years : Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that D0 = $3.00.

Assess expected cost savings in hardware infrastructure : Assess expected cost savings in hardware infrastructure.Create a diagram through the use of Microsoft Visio or an open source alternative.

Explain at least three complications of cancer : Explain at least three complications of cancer, the side effects of treatment, and methods to lessen physical and psychological effects.

Constant rate is stock expected to grow after year three : At what constant rate is the stock expected to grow after Year 3?

Explain what type of anemia does ms a most likely have : Explain what type of anemia does Ms. A most likely have? In an essay of 500-750 words, explain your answer and include rationale.

User Account

All Pages