Stock Values. Integrated Potato Chips paid a $1 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4 percent per year.
a.What is the expected dividend in each of the next 3 years?
b.If the discount rate for the stock is 12 percent, at what price will the stock sell?
c.What is the expected stock price 3 years from now?
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? Compare your answer to (b).
Can anyone help me with this problem?It's a interview question for a accounting position.?
a) $1.04 per share by the end of this year, $1.09 by the end of the next, and $1.14 at the end of the three years.
b) 88 cents per share.
c) $1.14 per share.
d) $1.04 per share. At the end of three years you would see a 14 % growth based on the dollar value and roughly a 29 and half percent increase on the $88.00 insiders price.
Reply:a. $1.04, $1.08, $1.12.
b. not enough information.
c. no enough information.
d. You will receive payments of $1.04, $1.08, and $1.12. Present value is $2.31.
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