Find the present value of all future dividends beginning

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Leland Manufacturing Company anticipates a noncontact growth pattern for dividends. Dividends at the end of year 1 are $4.00 per share and are expected to grow by 20 percent per year until the end of year 4 (that's three years of growth). After year 4, dividends are expected to grow at 5 percent as far as the company can see into the future. All dividends are to be discounted back to present at a 13 percent rate (Ke = 13 percent).

  • a. Project dividends for years 1 through 4 (the first year is already given). Round all values that you compute to two places to the right of the decimal point throughout this problem.
  • b. Find the present value of the dividends in part a.
  • c. Project the dividend for the fifth year (D5).
  • d. find the present value of all future dividends, beginning with the fifth year's dividend. The present value you find will be at the end of the fourth year. 
  • e. Discount back the value found in part d for four years at 13 percent.

Reference no: EM13451683

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