You are evaluating the purchase of Charbridge,Inc.ordinary shares that currently pay no dividend and is not expected to do so for many years.Because of rapidly growing sales and profits,you believe the share will be worth $51.50 in 3 years.If your required rate of return is 16%,what is the share worth today?

Question

Quizplus · Accepted Answer

The present value of the share can be calculated using the formula for the present value of a future sum: PV = FV / (1 + r)^n, where FV is the future value ($51.50), r is the required rate of return (16% or 0.16), and n is the number of years (3). Plugging in the values: PV = $51.50 / (1 + 0.16)^3 = $32.99.

You Are Evaluating the Purchase of Charbridge,Inc