7. Expected dividends as a basistor stock values A stock's current dividend is $1.00, 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. 10 Calculate the PV or the dividend paid today (D) and the PV of the dividends expected to be paid 10, 20, and so years from now (Dio. D20, and D30). Assume that the stock's required return (s) is 5.40%. Expected Dividend's Future Value Present Value Time Period 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 lexpected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the For a particular dividend payment will increase depending on how far from today the dividend is expected to be received Using the blue curve (circle symbols), plot the Nature value of each of the expected future dividends for years 10, 20, and 50. The resulting curve www 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 (Tooltip: mouse over the points in the graph to see their coordinates.) 40.00 Expected Dividends 0.00 FV of Dividends DIVIDENDS (5) 400 200 PV of Dividends 10 20 40 50 YEARS