The expected value (EV) is a
probable value for a given investment. By calculating expected values,
investors can decide the scenario most likely to give them their preferred result.<span>
<span>
Formula for expected value is:</span></span>
Expected value = stock return’s annual
dividend divided by (required return – dividend growth rate)
P₅= [$1.40×(1 + 0.02)₆<span>]/(0.16 - 0.02) = $11.26</span>
The answer is $11.26
Debited in receipts and payments account.
I hope it helped you!
