Final answer:
The price per share an investor would pay for Babble, Inc. is determined by calculating the present value of expected dividends, then dividing by the number of shares. The present value calculations consider the amount of dividends and the time at which they are received, discounted by a rate that reflects the required return on investment. Without a given discount rate, the exact price per share cannot be calculated.
Step-by-step explanation:
To determine the price per share an investor would pay for Babble, Inc., we need to calculate the Present Value (PV) of the dividends to be received over the next two years. Since all profits will be distributed as dividends and we know the exact amounts and timeline of these payments, we can discount them to their present values using an appropriate discount rate, which is not provided in the scenario and typically reflects the investor's required rate of return.
Assuming a discount rate, we could use the formula: PV = D / (1 + r)n, where D is the dividend payment, r is the discount rate, and n is the number of years in the future the dividend will be received. For example, if a dividend of $20 million is expected in one year and the discount rate is 10%, the PV of this dividend would be approximately $18.18 million.
After calculating the PVs for all expected dividends, we'd sum them to get the total PV of dividends to be paid by Babble, Inc. Then, we'd divide this total by the number of shares (200 in this case), to compute the price per share.
However, since we don't have the discount rate, we cannot provide a precise number here.