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a) (10 marks) You own 100 sh that will pay 5$ in one yr and 15$ in 2yrs. Calculate the current value of your shares
a) (10 marks) You own 100 sh that will pay 5$ in one yr and 15$ in 2yrs. Calculate the current value of your shares if the discount rate is 12% pa. You would prefer equal dividends in both years. Calculate the size of the dividend and detail the actions you would take. Show that the value of your shares has not changed. b) (5 marks) Calculate the % cost of not taking the discount when credit terms are 3/10 net 60. What is the % cost if you stretch the payment to 90 days? What are the disadvantages of stretching?
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