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The following graph shows the value of a stocks dividends over time. The stocks current dividend is $1.00 per share, and dividends are expected to grow at a constant rate of 3.50% per year. The intrinsic value of a stock should equal the sum of the present value (PV) of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends. Calculate the present value (PV) of the dividend paid today (Do) and the discounted value of the dividends expected to be paid 10 and 20 years from now (D10 and D20). Assume that the stocks required return (r.) is 10.40%. Note: Carry and round the calculations to four decimal places. Time Period Dividends Expected Expected Dividends Future Value Present Value Now End of Year 10 End of Year 20 End of Year 50Using the orange curve (square symbols), plot the present value of each of the expected future dividends for years 10, 20, and 50. The resulting curve will illustrate how the PV of a particular dividend payment will decrease depending on how far from today the dividend is expected to be received. Note: Round each of the discounted values of the of dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. DIVIDENDS ($) 6.00 Discounted Dividends FV of Dividends 5.00 4.00 3.00 2.00 1.00 PV of Dividends 0.00 0 10 20304050 60 YEARS

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Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text ta copy. в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard Alignment Number Cells BB1 AV AW AX AY AZ BA BC BD BE BF BG BH BI 4 current dividend 6 GROWTH RATE 3.50% DISCOUNT RATE = expected dividends present value 10.40% 7 Time periodDiidends expected Future value 9 now 10 End of year 10 1*(10.035)101.4106 1.4106/(1+0.104)100.5245 11 End of year 20 110.035)A201.98981.9898/(1+0.104)A20 0.2751 12 End of year 50 1*(1 + 0.035)^50 5.5849 5.5849/(1+0.104)^50-0.0397 13 14 15 16 17 18 19 1 Sheet1 Sheet4 | PV FV DIVIDEND 6.0000 MEAN STDV DEAR Sheet2 COV TİME SERIES corr REGRESSION CAMERAEXP RETURN ! TREND MATRIXIN 09-01-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy. E AutoSum Wrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ Sort &Find & 2 ClearFe Select Edting Format Painter Clipboard Alignment Number Cells AV AW AX AY AZ BA BC BD BE BF BG BH BI 18 19 20 21 6.0000 5.5849 5.0000 future dividend 10 20 50 present value of dividend 23 year 24 25 26 27 28 29 30 31 32 4.0000 future dividend 1.4106 0.5245 1.9898 0.2751 5.5849 0.0397 3.0000 present value of dividend 2.0000 410 1.0000 45 0.0000 10 20 30 40 50 34 35 36 4 SheetiSheet4 PV FV DIVIDEND YEARS MEAN STDV DEAR Sheet2 TIME SERIEScom REGRESSIONCAMERAEXP RETURN TREND MATRIXIN 09-01-2019

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