7. Expected dividends as a basisfor stock values A stock's current dividend is $1.00, and dividends are expected to grow at a constant rate of 3.50% 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 PV of the dividend paid today (Du) and the PV of the dividends expected to be pard 10, 20, and 50 years from now (D10, D20, and D.). Assume that the stock's required return () is 10.40% Expected Dividend's Time Period Future Value Present Value Now End of Year 10 End of Year 20 End of Year 50 Using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve wil illustrate how the PV of a particular dividend payment will decrease 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. (Tooltips Mouse over the points in the graph to see their coordinates.) FV of Dividends -0- Discounted Dividends 200 OVIDENDS (3) 300 8 F w