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a_sh-v [17]
2 years ago
13

You are planning to purchase the stock of Ted's Sheds Inc. and you expect it to pay a dividend of $3 in 1 year, $4.25 in 2 years

, and $6.00 in 3 years. You expect to sell the stock for $100 in 3 years. If your required return for purchasing the stock is 12 percent, how much would you pay for the stock today
Business
1 answer:
Vika [28.1K]2 years ago
6 0

Answer:

$81.52

Explanation:

To determine the price of the stock, one has to calculate the present value of the stock.

The present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Cash flow in year 1 = $3

Cash flow in year 2 = $4.25

Cash flow for year 3 = $100 + $6 = $106

I = 12 %

Present value = $81.52

The price one would pay for the stock today is $81.52

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

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Presented below is selected financial information for Cullumber Company for December 31, 2022. Inventory $ 25,000 Cash paid to p
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Basically there are three types of activities:

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2. Investing activities: It records those activities which include purchase and sale of the fixed assets

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(A) Operating activities: Cash paid to suppliers 103,600 and Cash received from customers 132,100

(B) Investing activities:  Cash paid to purchase equipment $ 11,000

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Now the preparation of the cash flow statement is shown below:

Cash flow from operating activities:

Cash received from customers                            $132,100

Less: cash paid to suppliers                                -$103,600

Net cash flow from operating activities (A)            $28,500

Cash flow from investing activities:

Cash paid to purchase equipment                       -$ 11,000

Net cash flow from investing activities (B)             -$11,000

Cash flow from financing activities:

Cash received from issuing common stock           $21,400

Less: Cash dividends paid                                     -$6,100

Net cash flow from financing activities (C)         $15,300

Net cash increase (A+B+C)                                   $32,800

Add: Beginning cash balance                              $7,500

Ending cash balance                                            $40,300

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