Answer:
The price of the stock today is $12.43
Explanation:
The price of the share today can be calculated using the DDM approach whereby discount the expected future cashflows by the required rate of return and calculating the perpetuity value or terminal value where the growth becomes zero.
The price of the Stock today is,
P0 = 0.28 * (1+1) / (1+0.115) + 0.28 * (1+1)² / (1+0.115)² + 0.28 * (1+1)³ / (1+0.115)³ + [(1.5 / 0.115) / (1+0.115)³]
P0 = $12.428 rounded off to $12.43
The negative relationship between the quantity of a good, service, or resource and the marginal utility obtained from each additional unit consumed in a given period of time describes diminishing marginal utility.
<h3>What is
diminishing marginal utility?</h3>
Marginal utility is the increase in utility as consumption is increased by one unit.
According to the law of diminishing marginal utility, as more of a product is consumed, utility increases at a diminishing rate. Economic theory suggest that consumption is maximised when marginal utility is equal to marginal revenue.
To learn more about diminishing marginal utility, please check: brainly.com/question/13998299
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