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    Stock Values and Dividends Payouts

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    Figuring stock values and dividends payouts.

    A company paid a $1 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4 percent per year.

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

    B. If the discount rate for the stock is 12 percent, at what price will the stock sell?

    C. What is the expected stock price 3 years from now?

    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? Compare the answer to (b).

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    Solution Summary

    This solution contains step-by-step analysis of changes to stock values and dividend payouts over years. All workings and formulas are shown enclosed in an Excel file.