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    Stock Price using annuity

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    Present Value of $1
    Discount Rate
    Present Value of an Annuity of
    $1 Discount Rate

    Periods
    8%
    10%
    8%
    10%

    5
    .6806
    .6209
    3.9927
    3.7908

    7
    .5835
    .5132
    5.2064
    4.8684

    9
    .5002
    .4241
    6.2469
    5.7590

    A particular common stock has an annual cash dividend of $2.00 per share and is predicted to have a market value of $30 per share 5 years from now. Assuming a discount rate of 10%, a fair market price for the stock today is:

    a. $20.00

    b. $26.21

    c. $37.58

    d. $56.21

    © BrainMass Inc. brainmass.com June 4, 2020, 12:45 am ad1c9bdddf
    https://brainmass.com/business/annuity/stock-price-using-annuity-358173

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    Solution Summary

    The solution computes stock price using annuity table.

    $2.19

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