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A stock is expected to pay dividends of $1.00, $0.75 and $2.00 for the next 3...

A stock is expected to pay dividends of $1.00, $0.75 and $2.00 for the next 3 years, respectively. After that time, dividends are expected to grow at a constant rate of 6% indefinitely. The required return on the stock is 10%. Compute the present value of the non-constant dividends

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Answer #1
Year Dividend × Factor PV
                       1 1 0.909091 0.909091
                       2 0.75 0.826446 0.619835
3 2 0.751315 1.50263
Present value 3.031555

Pesentn value of non constant dividends is 3.03

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