The PV of the dividends is 107,843.1374.
Present value is the idea that states a sum of money these days is worth extra than that same quantity in the future. In other phrases, cash obtained in the future is not well worth as a great deal as an equal quantity obtained today.
The dividend cut price model DDM is a quantitative technique used for predicting the price of an enterprise's inventory primarily based on the idea that its gift-day fee is really worth the sum of all of its future dividend bills when discounted and returned to its present fee.
A dividend last year amounting to sh 100,000.
The dividend stream is expected to grow by 10%
The discount rate is 20%
The PV of the dividends is
Future Value = 10% 0f 100,000
= 10,000
Total future value = 100,000 + 10000
110000 =
rate = 20%
Present Value= Future Value / (1+interest rate%)
= 110000 / (1 + 0.2)
= 110000/1.02
= 107,843.1374
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