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 ```This is my first post here and I am trying to complete this assignment but my instructor never really spent any time on this subject. Can someone assist me with this question below. 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).```
 ```Jimson5681 -- A. Dividends today are D0 = \$1 per share. Dividend at the end of year 1 = \$1 * 1.04 = \$1.04 (You?ll use 0.04 for 4 percent; 0.12 for 12% Year 2 = (1.04) ^2 = \$1.08 Year 3 = (1.04 ^3 = \$1.12 B. The general model for stock pricing looks like this: Pi = Di / (r-g) Pi = price in period i Di = dividends in period i r = required rate of return (in decimals) g = dividend growth rate i = period, usually expressed in years P0 = \$1 / (0.12 ? 0.04) = \$1 / (0.08) = ? C. You can use the same formula to figure the stock price in year 3 ? it?s P3. Just make sure that you adjust D0 to D3 ? as your dividends have grown. So, it?s P3 = \$1.12 / (0.12 ? 0.04) = \$1.12/(0.08) = ? (hint: it?s bigger!) D. First let?s do each year?s cash flows ? and don?t forget that you?re spending money up front (that?s negative cash flow) -- but the other returns are positive: Year 0: -\$12.50 Year 1: \$1.04 Year 2: \$1.08 Year 3: \$1.12 + \$14.00 (that?s the answer to C, \$14) NPV factor is figured by dividing \$1 worth of value by the (1 + i)^t, where i = discount rate and t = time (in years) that has passed. For stock bought today, t = 0 and the NPV factor is \$1. Phrased differently, \$1 today is worth \$1 ? but in a year it?s depreciated by 12% and so it?s worth \$1/(1.12)^1 = 0.8929. If you?ll be doing these NPV calculations often, the smoothest way to handle it is to set up your NPV factors in a specific line because it simplifies complicated cash flow analyses. It also allows you to check your NPV calculations and quickly spot errors if the number's not declining as it seems it should. So here are your NPV factors: Year 0 (today): 1 Year 1: 0.8929 Year 2: 1/(1.12)^2 = 0.7972 Year 3: 1/(1.12)^3 = 0.7118 The discounted cash flow becomes: Year 0: -\$12.50 Year 1: \$1.04 * 0.8929 = \$0.93 Year 2: \$1.08 * 0.7972 = \$0.86 Year 3: \$15.12 = \$10.76 TOTAL DISCOUNTED CASH FLOW = \$0.05 That?s not much money to make on a \$12.50 investment. In fact, it?s effectively zero ? and if we hadn?t rounded 8 different calculations of dividends and NPV, it would be zero. Why? It?s because the stock has been priced with future cash flows and earnings growth in mind ? and with a 12% discount rate. Holding the stock will become more profitable only if dividends grow faster in the 3-year period ? or if the discount rate declines. Let us know via a Clarification Request, if any portion of this doesn?t make sense. Best regards, Omnivorous-GA```