You are evaluating purchasing ordinary shares of Charbridge Ltd, which currently pays no dividend and is not expected to do so for many years.Because of rapidly growing sales and profits, you believe the shares will be worth $51.50 in three years.If your required rate of return is 16%, what is the shares' worth today?

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Quizplus · Accepted Answer

To calculate the present value of the shares, we use the formula: PV = FV/(1+r)^n, where PV is the present value, FV is the future value, r is the required rate of return, and n is the number of years. Thus, PV = $51.5/(1+0.16)^3 = $32.99. Therefore, the shares should be worth $32.99 today.

You Are Evaluating Purchasing Ordinary Shares of Charbridge Ltd, Which