### Create an Account

Home / Questions / The following graph shows the value of a stocks dividends over time the stocks current div...

# The following graph shows the value of a stocks dividends over time the stocks current dividend is \$100 per share and dividends are expected to grow at a constant rate of

The following graph shows the value of a stock's dividends over time. the stock's current dividend is \$1.00 per share, 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. Calculate the present value (PV) of the dividend paid today (D_0) and the discounted value of the dividends expected to be paid 10 and 20 years from now (D_10 and D_20). Assume that the stock's required return (r_s) is 5.40%. Using the blue curve (circle symbols), plot the future value of each of the expected future dividends for years 10, 20, and 50. the resulting curve will illustrate how the FV of a particular dividend payment will increase depending on how far from today the dividend is expected to be received.

Apr 06 2020 View more View Less Subscribe To Get Solution