Final answer:
An investor may pay $300,000 for a share of stock in Babble, Inc. by simply summing up the anticipated dividend payments of $60 million over two years and dividing by the 200 shares available, without discounting for any rate of return.
Step-by-step explanation:
To determine what an investor will pay for a share of stock in Babble, Inc., we must calculate the present value of the expected dividend payments, since the stock value is the present value of its future dividends. Babble, Inc. plans to pay out dividends of $15 million immediately, $20 million one year from now, and $25 million two years from now. To calculate the present value of these dividends, we would typically discount them by an appropriate rate of return or discount rate. However, since a specific discount rate is not provided, let's proceed by simply summing up the dividends without discounting them for simplification.
The total dividends over the two-year period are $15 million + $20 million + $25 million = $60 million. Since there are 200 shares of stock, we can calculate the value per share by dividing the total dividends by the number of shares. Thus, an investor might be willing to pay the amount equal to the dividends per share, which is $60 million / 200 shares = $300,000 per share.