Question

pablo corporation acquired 60% of abagia corporation on january 1, 2013, at a cost of $20,000 in excess of book value. also, on july 1, 2013, pablo acquired 60% of babin corporation at book value. on january 1, 2014, abagia acquired a 20% interest in babin at a cost of $10,000 in excess of book value. the excess purchase costs paid by pablo and abagia were attributed to july 1, 2014, pablo sold land with a book value of $20,000 to abagia for $40,000. the $20,000 unrealized gain is included in pablo's separate income. separate net incomes for the affiliated companies (excluding investment income) for 2014 are:pablo $250,000abagia 70,000babin 100,000controlling interest share of consolidated net income for 2014 is

Answer 1

To calculate what an investor will pay for a share of stock in Babble, Inc., one must discount the future dividends to the present and divide by the number of shares.

Step-by-step explanation:

The case of Babble, Inc. illustrates a scenario where an investor needs to determine the present value of future dividends to decide what to pay for a share of the company. The founder's age and his retirement plan imply that Babble's future is limited, intensifying the importance of accurate present value calculations. To calculate the current price per share, an investor would discount the expected dividends to the present using a chosen discount rate. This involves calculating the present value of $15 million received immediately, $20 million received in one year, and $25 million received in two years, and then dividing these values by the total number of shares (200) to determine the price per share.