Problem 7-8 Dividend Discount Model (LO2)

Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $6.90 at the end of the first year.

What value would an investor place on the stock?

Problem 7-8 Dividend Discount Model (LO2) Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $6.90 at the end of the first year. What value would an investor place on the stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Horizon (years) PV (dividends) PV (terminal price) Value per Share \begin{tabular}{|r|r|r|r|} \hline 1 & $2.68 & $72.32 & $75 \\ \hline 2 & 5.26 & 69.74 & 75 \\ \hline 3 & 7.75 & 67.25 & 75 \\ \hline 10 & 22.87 & 52.13 & 75 \\ \hline 20 & 38.76 & 36.24 & 75 \\ \hline 30 & 49.81 & 25.19 & 75 \\ \hline 50 & 62.83 & 12.17 & 75 \\ \hline 100 & 73.02 & 1.98 & 75 \\ \hline \end{tabular}