Integrated Potato Chips paid a $1.70 per share dividend yesterday
Question
Integrated Potato Chips paid a $1.70 per share dividend yesterday. You expect the dividend to grow
steadily at a rate of 5% 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 11%, 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 | $ | $ | $ |
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