Question: Problem 7-11 Stock Values (LO2) (Adjusted to be formula given) Integrated Potato Chips paid a $3.40 per share dividend yesterday . You expect the dividend

Problem 7-11 Stock Values (LO2) (Adjusted to be formula given)

Integrated Potato Chips paid a $3.40 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 5.50% per year forever.

a.

What is the expected dividend in each of the next 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Expected Dividend
Year 1 $
Year 2
Year 3

b.

If the discount rate for the stock is 11.00%, at what price will the stock sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Current price $

c.

What is the expected stock price 3 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Future price $

d.

If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Year 1 Year 2 Year 3
DIV $ $ $
Selling price
----------- ----------- --------- -----------
Total cash flow
PV of cash flow
sum of the PV's $

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