Question
A) You wish to create a scholarship foundation that will start issuing awards 15 years from now and will last forever. You want the yearly
A) You wish to create a scholarship foundation that will start issuing awards 15 years from now and will last forever. You want the yearly total award to be $7,375. The interest rate is always 5.5%. Find the present value of the scholarship. Hint: First find the PV of the perpetuity at the time point a year before the first award comes.
B) A share of a company's stock will earn $0.72 of dividend per period forever (of course, the dividends of stock in reality usually fluctuate from period to period). The discount rate for the dividend flows is 7%. Find the present value of a share of the company's stock.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started