Final answer:
An investor might be willing to pay $300,000 for a share of stock in Babble, Inc., which is calculated by dividing the expected total profits of $60 million by the number of shares, which is 200.
Step-by-step explanation:
To determine what an investor would pay for a share of stock in Babble, Inc., we need to calculate the present value of the dividends that the investor would receive since the company will be disbanded in two years and all profits are paid out as dividends.
The investor will receive dividends of $15 million in the present, $20 million one year from now, and $25 million two years from now.
Assuming there is a discount rate or required rate of return (which hasn't been provided in the question), we would use that to discount the future dividends to their present value.
However, since the discount rate is not specified, we will consider the dividends without discounting. The total profit over the two years is $15 million + $20 million + $25 million = $60 million.
As the company has 200 shares of stock, we divide the total profit by the number of shares to determine the earnings per share.
Thus, the value of each share, in this case, would be $60 million divided by 200 shares, which equals $300,000 per share.
This is the amount an investor might be willing to pay for a share, ignoring personal valuation adjustments based on their required rate of return.