Jack Hammer invests in a stock that will pay dividends of $3.08 at the end of th
ID: 2811700 • Letter: J
Question
Jack Hammer invests in a stock that will pay dividends of $3.08 at the end of the first year, $3.42 at the end of the second year, and $3.78 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 $56. What is the present value of all future benefits if a discount rate of 13 percent is appled? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Dividend Present Value 3.06 3.42 3.78 56.00 Total 0.00Explanation / Answer
Calculation of Present value of all future benafits
3.06 - 3.06*PVF@13%,Year1
=3.06*.885
=2.71
3.42 - 3.42*PVF@Year2
=3.42*.783
=2.68
3.78 - 3.78*.693
=2.62
56 56*.693
=38.81
TOTAL 46.82
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