Question

Jasmine makes a gift of several shares of stock in Telly Corporation to Elfrida. The transactions involving this stock that occurred closest to the date of the gift took place six trading days before the date of the gift at a mean selling price of $60 and four trading days after the gift at a mean selling price of $64. Round your answer to the nearest cent. The fair market value of each share of Telly stock is $

Answer 1

An investor will pay approximately $242,000 per share of Babble, Inc. stock based on the present value of the future cash flows.

Step-by-step explanation:

The investor will pay for a share of stock in Babble, Inc. based on the present value of the future cash flows, which are the expected profits. To calculate the present value, we need to discount each cash flow by the rate of return.

In this case, assuming a required rate of return of 8%, the present value of the $15 million, $20 million, and $25 million profits would be $13.89 million, $15.99 million, and $18.52 million respectively. Adding up these present values gives us a total of $48.40 million.

Therefore, an investor would pay approximately $242,000 per share of Babble, Inc. stock.