Final answer:
Retained Earnings at the end of the period are calculated by taking the beginning balance of Retained Earnings, adding net income, and subtracting any dividends. In share valuation, Retained Earnings affect the equity and the present value of total profits divided by the number of shares gives the price per share.
Step-by-step explanation:
To find the Retained Earnings at the end of the period, you typically start with the Retained Earnings balance at the beginning of the period, add the net income (or loss) for the current period, and then subtract any dividends paid out to shareholders. This can be summarized by the formula: Retained Earnings (end of period) = Retained Earnings (beginning of period) + Net Income - Dividends Paid.
In the context of figuring out how to value shares based on present value (PV), the Retained Earnings would contribute to the company's equity and therefore affect the overall valuation. For instance, if you were calculating the price per share based on profits and had a total profit's PV, you would divide this by the number of shares to find the price per share. As an example, if the PV of total profits is 51.3 million, and there are 200 shares, the calculation would be 51.3 million/200 = 0.2565 million, or $256,500 per share.
It's important to note that the projected profits used to calculate such valuations are based on estimates and the chosen interest rate can significantly impact the present value calculations.