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G H 1 B C D E F Given: Definition The expected upcoming (end...

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Finance

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G H 1 B C D E F Given: Definition The expected upcoming (end of period 1) dividend The expected upcoming (end of period 2) dividend The expected upcoming (end of period 3) dividend The required rate of return on the firm's common stock The expected future stock price at the Horizon time The present value of the stock share (market price) Notation: Inputs: D $4.00 D $4.50 D3 $5.00 r 0.08 PH $70.00 P. Finance Concept: P = PV of expected future dividends Po = D/(1+r)' + D(1+1) +...+ (Divy +Pp)/(1+1)H Where H is the horizon or specific investment time period. In Words: The Present Value of a stock share depends on the stream of expected dividends. This is the generalized stock valuation model which is also how we value bonds. xcel Solution Using a Table: Year 1 Year 2 Year 3 Today 0.08 0 = SIS20 2

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