<span>You are given an annual dividend of $2.10 for the fifteen years that you plan on holding it. Also, after 15 years, you are given to sell the stock for $32.25. You are asked to find the present value of a share for this company if you want a 10% return. You have to mind that the future stock for 15 years is $32.25. You are not only going to mind the present value of the annuity at $2.10 but also the $32.25.
With the interest of r = 10% and number of years of n = 15, we get
PVIFA = 7.6061.
For annuity we have,
$2.10 * 7.60608 = $15.973
For $32.35 with r = 10% and n = 15
PVIF = 0.239392
Thus for the present value of selling price,
$32.25 * 0.239392 = $7.720
Thus the present value of the share
P = $15.973 + $7.720
P = $23.693
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Answer:
-1.0
Explanation:
Diversification in a portfolio refers to spreading investments in such a way so as to minimize risk.
The correlation coefficient r between two securities signifies how return from one security is related with another security. For example, two securities of the same sector may move in the same direction or positively correlated as in if price of one rises, the price of other rises too maybe not by the same margin.
In case of a negative correlation, the security returns move in opposite directions i.e the securities are least related to one another.
Maximum diversification is achieved when r is equal to -1 i.e the two stocks move in opposite direction by the same magnitude.
GDP deflator is nominal GDP divided by real GDP.
Therefore, 225/real GDP = 3, and then real GDP would then equal 75.
Answer:
Yes, it does.
Explanation:
It definitely impacts the present value analysis. If we are evaluating two proposals and we ignore the useful lives of the investments, then
- The present values of the investment proposals will be inaccurate.
- The cash flows might be inaccurate.
- The discount factor to be used will also be inaccurate.
- The overall results will be misleading.
- The tax credits and balancing allowances and charges will also be inaccurate.