Final answer:
The price an investor may pay for a share of Babble, Inc., after calculating the present value of anticipated dividends and considering an interest rate of 15%, is approximately $256,500 per share.
Step-by-step explanation:
To determine the price an investor is willing to pay for a share of stock in Babble, Inc., which offers speaking lessons, we need to calculate the present value (PV) of the anticipated dividends. Since the company will pay out its profits as dividends immediately, and in one and two years from now, these amounts must be discounted to their present value using an appropriate interest rate or required rate of return. If we assume an interest rate of 15%, the present value calculations for the $15 million (immediate), $20 million (in one year), and $25 million (in two years) have to be made separately. Then, we sum these present values to get the total present value of the dividends. Dividing this total by the number of shares (200 shares), we obtain the price per share an investor is likely to pay. For Babble, Inc., the total present value (PDV) of the profits is stated to be $51.3 million; dividing this by 200 shares gives a value of $256,500 per share.