Integrated Potato Chips paid a $2.90 per share dividend yesterday . You expect t

Question

Integrated Potato Chips paid a $2.90 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 5% per year.

What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

If the discount rate for the stock is 11%, at what price will the stock sell?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Integrated Potato Chips paid a $2.90 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 5% per year.

Explanation / Answer

Solution on Excel....

Given.....

Per share dividend = $2.90

Constant Growth Rate = 5.00%

Discount Rate = 11.00% (b)

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

Solution-

b. If the discount rate for the stock is 11%, at what price will the stock sell?

Solution-

What is the expected stock price 3 years from now?

Solution-

If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments?

Solution-

Expected dividend: DIV1 = $ 3.0450 DIV2 = $ 3.1973 DIV3 = $ 3.3571

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