Integrated Potato Chips paid a $1.50 per share dividend yesterday . You expect t

Question

Integrated Potato Chips paid a $1.50 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 6% per year.

a.

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

Expected Dividend

  Year 1

$      

  Year 2

  Year 3

b.

If the discount rate for the stock is 10%, at what price will the stock sell today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Current price

$   

c.

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

  Future price

$   

d.

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.)

d.

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.)

    Year 1

    Year 2

    Year 3

  Dividend

$    

$    

$    

  Sale of stock

  Total cash flow

$    

$    

$    

  PV of cash flow

$    

$    

$    

Integrated Potato Chips paid a $1.50 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 6% per year.

Explanation / Answer

Expected Dividend   Year 1 1.59   Year 2 1.69 Discount factor   Year 3 1.79 0.909090909 0.826446281 Assume current stock price is 10 rupees 0.751314801 b.) Current price now will be (10+1.59)*.9091=10.54 c.) 29.05 Add dividend for the respective years and multiply them by their discount rates d.) 15.07 Payment will be dividend's and stock price Present value of these payments based on discount factor 1.45 year 1 1.39 year 2 1.34 year 3

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.