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Integrated Potato Chips paid a $1.50 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 1.50% per year forever. |
| 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 6.00%, at what price will the stock sell? (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.) |
| Year 1 | Year 2 | Year 3 | |
| DIV | $ | $ | $ |
| Selling price | |||
| Total cash flow | |||
| PV of cash flow | |||
| sum of the PV’s $ | |||
