Reference no: EM132816673

BMW just paid a $1 per share dividend. You expect the dividend to grow steadily at a rate of 4% per year.

Problem a) What is the expected dividend in each of the next 3 years?

Problem b) If the discount rate fort he stock is 12%, at what price will the stock sell?

Problem c) What is the expected stock price 3 years from now?

Problem d) If you buy the stock and plan to sell it 3 years from now, what are your expected cash flows in (i) year 1; (ii) year 2; (iii) year 3?

Problem e) What is the present value of the stream of payments you found in part (d)? Compare your answer to part (b).