You will receive $6,800 three years from now. The discount rate is 10 percent. a. What is the value of your investment two years from now? Multiply $6,800 3 (1/1.10) or divide by 1.10 (one year’s discount rate at 10 percent).
The value of investment after two years is $6,181.82.
Future value (FV) = $6,800
Interest Rate (i) = 10%
Discount factor = 1.10
Question: Maxwell Communications paid a dividend of $3 last year. Over the next 12 months, the dividend is expected to grow at 8 percent, which is the constant growth rate for the firm (g). The new dividend after 12 months will represent D1. The required rate of return (Ke) is 14 percent. Compute the price of the stock (P0)
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