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The preferred stock of General Motors pays an annual dividend of $1.6 forever. The appropriate discount rate is 7% per year. Attempt 1/3 for 10 pts. Part 1 What is the present value of all dividends
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The preferred stock of General Motors pays an annual dividend of $1.6 forever. The appropriate discount rate is 7% per year. Attempt 1/3 for 10 pts. Part 1 What is the present value of all dividends

User Joe Carnahan
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3 votes

Answer:

Present Value of all dividends = $22,857,142.86

Step-by-step explanation:

A perpetuity is a series of cash flows that is receivable or payable for indefinitely number of years

The present value of a perpetuity is determined as follows:

PV= A/r

PV - Present value of a perpetuity, A- annual cash flow(dividend),- 1,600,000 r- interest rate - 7%

PV = 1,600,00 รท 0.07= 22,857,142.86

Present Value of all dividends = $22,857,142.86

User Earlene
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