What is the present value of these two dividends

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Reference no: EM131022020

Constant Growth Model Peter's Pickle Chips (PPC) paid $2 in dividends this past year. Analysts expect this payment will grow at 6 percent annually for the indenite future. a. What stock price is forecast with this model if a required rate of 10 percent is appropriate (use the constant growth model)? b. What are the expected dividends for the next two years (i.e. DIV1 and DIV2)? What is the present value of these two dividends? c. What will be the estimated value of PPC two years from now? d. What is the present value of this price discounted to the present time (time zero)? e. Add the discounted price of PPC stock two years from now to the present value of the dividends in the rst two years (i.e. add the results of parts b and c). Compare the summation to the answer in part a, they should be equal (there may be small rounding error of a few pennies).

Reference no: EM131022020

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