Question: Please explain the solution with explanation Your broker offers to sell you some shares of Bahnsen&Co. common stock that paid a dividend of $2.00 yesterday.

Please explain the solution with explanation Your broker offers to sell

Please explain the solution with explanation

Your broker offers to sell you some shares of Bahnsen\&Co. common stock that paid a dividend of $2.00 yesterday. Bahnsen's dividend is expected to grow at 5% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 12%. a. Find the expected dividend for each of the next 3 years; this is, calculate D1,D2 and D3. Note that D0=$2.00 b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1,D2 and D3 and then sum these PVs

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