The Mayan Calendar Co. intends to liquidate all of its assets at the end of 2012 and pay out the proceeds as one giant dividend of $1,000 per share. For an investor who required a 10% rate of return, the value of Mayan stock on January 1 2012 would have been

Question

Quizplus · Accepted Answer

To calculate the value of the stock on January 1, 2012, we need to use the present value formula:

PV = FV/(1+r)^n

Where PV is the present value (or current value), FV is the future value ($1,000), r is the rate of return (10%), and n is the number of years until the dividend is paid out (1 year).

Plugging in the values:

PV = $1,000/(1+0.10)^1
PV = $1,000/1.10
PV = $909.09

Therefore, the value of the Mayan stock on January 1, 2012, would have been $909.09.