4. Expected dividends as a basis for stock values The following graph shows the value of a stock's dividends over time. The stock's current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 4.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10 and 20 years from now (D10 and D20). Assume that the stock's required return (rs) is 5.40%. Note: Carry and round the calculations to four decimal places Time Period Dividend's Expected Expected Dividend's Future Value Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the FV of a particular dividend payment will increase depending on how far from today the dividend is expected to be received Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($). 10.00 Expected Dividends 8.00 FV of Dividends 6.00 4,00 2.00 PV of Dividends 0.00 30 40 50 10 20 60 YEARS Clear All Which of the following statements is CORRECT? A. It is not possible for a firm to go public without raising any new capital. B. When a corporation's shares are owned by one individual, then the shares must be registered with the SEC, and the firm must file quarterly and annual financial statements with the SEC C.A publicly owned corporation is a company whose shares are traded in an organized security market, but those shares cannot be owned by corporations, only by individuals and institutional investors. D. Going public proves precisely what a firm's true intrinsic value is, and going public also ensures that a highly liquid market will always exist for the firm's shares. E. When stock in a closely held corporation is offered to the public for the first time, this transaction is called "going public