Question

plateau, incorporated, pays a dividend of $2.00 per share every other year with the last payment having just been paid. five years from now, the company is repurchasing all of the outstanding shares at a price of $50 per share. what is the current value of one share at a discount rate of 12 percent? group of answer choices $33.78 $34.03 $27.89 $34.99 $31.24

Answer 1

To calculate the current value of one share, we need to calculate the present value of the dividend payments and the repurchase price. The current value of one share is approximately $34.03.

Step-by-step explanation:

To calculate the current value of one share, we need to calculate the present value of the dividend payments and the repurchase price. The present value of the dividend payments can be calculated using the formula:

PV = D / (1 + r)^n

Where PV is the present value, D is the dividend payment, r is the discount rate, and n is the number of years. Given that the dividend is paid every other year and the discount rate is 12 percent, we can calculate the present value of the dividends. The present value of the repurchase price can be calculated using the same formula. After calculating the present values, we can sum them up to get the current value of one share.

In this case, the current value of one share is approximately $34.03.