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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

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The solution computes stock price using annuity table.

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