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    jones4318's Avatar
    jones4318 Posts: 1, Reputation: 1
    New Member
     
    #1

    Dec 10, 2007, 08:31 AM
    Determining the present value of all future benefits
    Jack Hammer 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, he believes that at the end of the third year he will be able to
    sell the stock for $33. What is the present value of all future benefits if a
    discount rate of 11 percent is applied? (Round all values to two places to the
    right of the decimal point.)
    Hermansherman's Avatar
    Hermansherman Posts: 37, Reputation: 4
    Junior Member
     
    #2

    Dec 10, 2007, 12:04 PM
    Present Value calculation

    $2.00/1.11 = 1.80

    $2.20/ 1.11/1.11 = 1.79

    $2.40/ 1.11 /1.11 /1.11 = 1.75

    $33/ 1.11/1.11/1.11= 24.12

    1.80+1.79+1.75+24.12 = $29.46

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