Benefits of discount rates

cnichols33 · #1 May 19, 2007, 07:23 PM

If someone invests in a stock that will pay dividends of $2.00 at the end of the first year; 2.20 at the end of the second year; and 2.40 at the end of the third year. Also, this person believes that at the end of the third year they will be able to sell the stock for $33 dollars. What is the present value of all future benefits if a discount rate of 11% is applied?

Lynn

bunnyKutty · May 19, 2007, 07:47 PM

Cash flows PV factor@11% Present value
2 0.901 1.8
2.2 0.812 1.79
2.4 0.731 1.75
30 0.731 21.93
Net present value of future benefits = $27.27



At Ask Me Help Desk you can ask questions in any topic and have them answered for free by our experts. To ask questions or participate in answering them you must register for a free account. By registering you will be able to: Get free answers from experts in any of our 300+ topics. Accept money for answers that you provide. Communicate privately with other members (PM). See fewer ads. Sign Up!