Answer:
P0 = $9.04279 rounded off to $9.04
Option c is the correct answer
Explanation:
Using the the dividend discount model, we calculate the price of the stock today. It values the stock based on the present value of the expected future dividends from the stock. To calculate the price of the stock today, we will use the following formula,
P0 = D1 / (1+r) + D2 / (1+r)^2 + D3 / (1+r)^3
Where,
- r is the required rate of return
P0 = 4 / (1+0.156) + 4 / (1+0.156)^2 + 4 / (1+0.156)^3
P0 = $9.04279 rounded off to $9.04
Given a 7 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,350, $1,550, $1,550, a
igor_vitrenko [27]
Answer:
The present value of cash flows is $ 5,292.13
Explanation:
The present value is today's equivalence of the company's future cash flow discounted using the 7% interest rate as a discount rate.
Formula for pv of a cash flow=cash flow/(1+r)^n
r is the 7% interest rate
n is the relevant year each cash flow relates to
PV=$1,350/(1+7%)^1+$1550/(1+7%)^2+$1550/(1+7%)^3+$1850/(1+7%)^4=
$ 5,292.13
It is penetration pricing that is illegal in the United States and many other countries<span>. So B is the correct answer</span>
Current members will pay more per month.
The quantity demanded for memberships will decrease.
The owner will make more money.
