Integrated Potato Chips paid a $2.70 per share dividend yesterday. You expect the dividend to grow...

Question

Integrated Potato Chips paid a $2.70 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? (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

Robert · Accepted Answer

Integrated Potato Chips paid a $2.70 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.)
Solution: 
 
Expected Dividend 
Year 1 $2.86 [2.7*(1+6%)]  
Year 2  $3.03 [2.86*(1+6%)] 
Year 3 $3.22 [3.03*(1+6%)]
b. 
If the discount rate for the stock is 10%,

Integrated Potato Chips paid a $2.70 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...

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