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loris [4]
3 years ago
10

Zephyr Inc. sells wind based systems for generating electricity. The company pays no dividends, but you estimate the stock will

be worth $50 per share 5 years from now and you require a 15% rate of return for stock investments of this type. What price should you be willing to pay for this stock?A) $12.50.
B) $24.86.
C) $43.48.
D) $57.50.
Business
1 answer:
-BARSIC- [3]3 years ago
3 0

Answer:

$24.86

Explanation:

The estimated stock of Zephyrl is $50

This is for a period of 5 years

The rate of return is 15%

Therefore the price that will be paid for this stock can be calculated as foloes

50= x (15/100^5)

50= x (0.15+1^5)

50= x (1.15^5)

50= 2.0113x

Divide both sides by the coefficient of x

= 50/2.0113

= 24.86

Hence the price that will be paid for the stock is $24.86

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