Answer:
$36.65
Explanation:
D1 = D*(1+g)
D1 = 1.8*(1+0.12)
D1 = 1.8(1.12)
D1 = $2.016
Price of stock P = D1 / (re - g)
Price of stock P = $2.016 / (0.175 - 0.12)
Price of stock P = $2.016 / 0.055
Price of stock P = $36.654545
Price of stock P = $36.65
So, $36.65 is the most that i will be willing to pay for the common stock if i am to purchase it today.
Adverse selection describes situations when high-risk persons are more likely to receive insurance or when one bargaining side has important knowledge that the other does not. Our goal is to influence decision-makers, both inside and outside of government, to consider the future and adopt long-term plans.
When vendors and/or purchasers have different knowledge about a certain component of a product's quality, this is referred to as adverse selection. Thus, those who work in hazardous environments or lead high-risk lives are more likely to buy life or disability insurance, knowing that they will likely be able to use it.
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