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The company plans to dissolve in two years. At the present time, dividends at each date are set equal to the cash flow of $18,000. There are 100 shares outstanding, so the dividend per share is $180. Assume an 8% required rate of return. What is the present value of a share of stock

User Sled
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5 votes

Answer:

$321 per share.

Step-by-step explanation:

Given that

Annual cash flows = $18,000

Number of shares outstanding = 100

Dividend per share = $180

Required rate of return = 8%

So by considering the above information, the present value of the share of a stock is

Present value of share = Dividend received × Present value of $1 received every year at the end of year 2 at 8%

= $180 × 1.7832

= $321 per share.

User DookieMan
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