The Firm X just paid a dividend of $1.26 per share on its stock. The dividends are expected to grow at a constant rate of 5% per
1 answer:
You might be interested in
Answer:
Interest rates and investment
If interest rates are increased then it will tend to discourage investment because investment has a higher opportunity cost. With higher rates, it is more expensive to borrow money from a bank. Saving money in a bank gives a higher rate of return.
Answer:
$20,229.5
Explanation:
Given:
Amount to be received = $5,000
Time period, n = 5 years
nominal discount rate = 10.725%
inflation rate = 3 percent
Now,
Using the Fischer's relation, we have
1 + Nominal rate = ( 1 + Real rate ) × ( 1 + Inflation )
on substituting the values, we get
( 1 + 10.725% ) = ( 1 + Real rate ) × ( 1 + 3% )
or
1.10725 = ( 1 + Real rate ) × 1.03
or
( 1 + Real rate ) = 1.075
or
Real rate = 1.075 - 1 = 0.075 or 7.5%
Thus,
Present Value of an ordinary annuity that makes $5000 every year payment for 5 years will be calculates as:
Present value = Monthly payment ×
or
Present value =
or
Present value = 5000 × 4.0459
or
Present value = $20,229.5