### Calculate the present value of these cash flows

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Suppose that a firm’s recent earnings per share and dividend per share are \$4.00 and \$3.00, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 21 seems high for this growth rate. The P/E ratio is expected to fall to 17 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your final answer to 3 decimal places.) Dividends Years First year \$ 3.24 Second year \$ 3.50 Third year \$ 3.78 Fourth year \$ 4.08 Fifth year \$ 4.41 Compute the value of this stock in five years. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Stock price \$ 99.91 Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value \$ 14.29

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