Question

Confusion Corp is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. The beta of Confusion Corp's stock is 1.25. If Confusion's intrinsic value is $21.00 today, what must be its growth rate

Answer 1

To determine the price an investor would pay for a share of stock in Babble, Inc., we need to calculate the present value of the expected profits and divide it by the number of shares. The present value calculations take into account the time value of money and the interest rate.

Step-by-step explanation:

To determine the price an investor would pay for a share of stock in Babble, Inc., we need to calculate the present value of the expected profits and divide it by the number of shares. The present value calculations take into account the time value of money and the interest rate. In this case, we are given the expected profits of $15 million, $20 million, and $25 million for the next three years. By discounting these profits at the given interest rate of 15%, we can calculate the present value. Lastly, we divide the present value of total profits by the number of shares to get the price per share that an investor would pay.

Answer 2

6.98

Step-by-step explanation: