A timeline depicting the important cashflows Your equations/substitution . The answer An example for a 4 cashflow timeline: It - 17 -16 -15 -14 -13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 495 0 0 0 0 0 0 o o o -688 o o o o o o 0 1 2 3 4 5 6 7 8 9 10 11 12 13 -319 0 0 0 392 CF An example for a annuity timeline: B D E F G H J K L M N 1 Value a $100 annuity that starts to pay today. It lasts for 12 years and has an interest rate of 12%. 2 3 Annuity value is calculated here (step 1 in blue), we need to move it forward one period to get the current value (step 2 in orange). 4 5 6 t -1 0 1 3 4 5 6 7 8 2 100 11 100 7 CF 100 100 100 100 100 100 100 9 10 100 100 Count: 100 8 12 How much should an investor be willing to pay for a stock that has a dividend of a $2.05 at the end of this year, $4.44 the year after, $1.85 in the finally year they plan on holding the stock. They expect to be able to sell it for $20.95 after receiving the 3rd dividend payment. The investor's required rate of return is 13.34%. You Answered $19.23 $6.54 $19.12 Correct Answer $20.92 $14.39