Question

Here is the timeline for (expected) dividends and the (expected) stock price at the end of...

Here is the timeline for (expected) dividends and the (expected) stock price at the end of 10 years: Years 0 1 2 3 4 5 6 7 8 9 10 $0 $5 $8 $3 $0 $2 $5 $4 $0 $0 $110 Discount rate is 12 percent. What is the present value of these cash inflows to the stockholder? Show the calculations.

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Answer #1
Answer:

Calculation of present value of the cash inflows to the shareholders:
Year Cash flows Present value factor @12% Present value
0 0 1 1.0000 0.00
1 5 =1/(1+0.12)^1 0.8929 4.46
2 8 =1/(1+0.12)^2 0.7972 6.38
3 3 =1/(1+0.12)^3 0.7118 2.14
4 0 =1/(1+0.12)^4 0.6355 0.00
5 2 =1/(1+0.12)^5 0.5674 1.13
6 5 =1/(1+0.12)^6 0.5066 2.53
7 4 =1/(1+0.12)^7 0.4523 1.81
8 0 =1/(1+0.12)^8 0.4039 0.00
9 0 =1/(1+0.12)^9 0.3606 0.00
10 110 =1/(1+0.12)^10 0.3220 35.42
Total 53.87

So, the present value of the cash inflows to the shareholders is $53.87 (Answer)
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