The stock’s current dividend is $1.00, and dividends are expected to grow at a constant rate of 3.5% per year. The intrinsic value of a stock should equal the sum of the present value of all of the dividends that a stock is supposed to pay in the future, but many people find it difficult to imagine adding up an infinite number of dividends.
Calculate the PV of the dividend paid today and the PV of the dividends expected to be paid in 10 to 20 years from now. Assume that the stock required return of 10.40%.