Answer:
Present Value of Annuity is $1,263,487
Explanation:
A fix Payment for a specified period of time is called annuity. The discounting of these payment on a specified rate is known as present value of annuity.
Formula for Present value of annuity is as follow
PV of annuity = P x [ ( 1- ( 1+ r )^-n ) / r ]
Where
P = Annual payment = $91,000
r = rate of return = 5.15%
n = number of years = 25 years
PV of annuity = $91,000 x [ ( 1- ( 1+ 0.0515 )^-25 ) / 0.0515 ]
PV of Annuity = $1,263,487
Answer:
B. $19.09
Explanation:
D1 = $0.50
D2 = $1.00
D3 = $1.50
D4 = $2.00
D5 = D4(1+g)
and <em>g</em> is given as 6%
D5 = 2.00(1.06) = 2.12
Next, find the PV of each dividend at a discount rate of 14%
PV(D1) = 0.50/(1.14) = 0.4386
PV(D2) = 1.00/(1.14²) = 0.7695
PV(D3) = 1.50/(1.14³) = 1.0125
PV(D4) = 2.00/(1.14^4) = 1.1842
Find the present value of the terminal value (D5 onwards);
PV(D5 onwards) = 
Sum up the PVs to find the current value of the stock;
= 0.4386 + 0.7695 + 1.0125 + 1.1842 + 15.6901
= 19.0949
Therefore, the current value = $19.09
The market mechanism benefits society by ensuring that: <span>scarce resources are channeled into products most desired by society
Market mechanism determines which products stays or go by relying purely on the force of supply and demand. If the products are desired by the customers, the producer will always keep up with the demand in order to rake in the potential profit.</span>