Integrated Potato Chips paid a $1 per share dividend yesterday. You expect the dividend to grow steadily

Question:

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

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

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

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

4. 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 your answer to (b).

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...