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 2.70%6 per year. The intringic 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 difficalt to imagine adding up an infinite number of dividends. Calculate the PV of the dividend paid today (Da) and the PV of the dividends expectod to be paid 10,20 , and 50 years from now (D,a. D an and Dso). Assufme that the stock's required return (rd) is 8,40%. Using the grey curve (star symbets). plot the present valie of each of the exbected future dividends for years 10,20 , and 50 . The vesulbing curve will Wustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be recirived Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. (Tool tip: Mouse ever the points in the graph to see their coordinates.) Using the grey curve (star symboks), plot the prosent value of each of the expected future dividends for years 10,20 , and so. The raxifting caine win Diustrate how the PV of a particular dividend payment will decrease depending on how far from fodey the divilend is expected to be mageved. Note: Round each of the discounted values of the of dividends to the nearent tenth decimal place before glotting it on the graph. (Tool tip: Mouse over the points in the graph to see their coordinates.) Assignment: Chapter 07 Stocks (Equity) - Characteristics and Valuation