Lakeside Sheet Metal is downsizing and plans on completely closing 3 years from now. The firm's liquidation plan calls for annual dividends of $2, $4, and $35 over the next 3 years, respectively. What is the current value of this stock given a discount rate of 14 percent?

Question

Quizplus · Accepted Answer

The current value of the stock is the present value of the expected dividends. Calculate the present value of each dividend and sum them up: PV = $2/(1.14)^1 + $4/(1.14)^2 + $35/(1.14)^3 = $28.46.

Lakeside Sheet Metal Is Downsizing and Plans on Completely Closing