Cayman Boats plans to pay a $1.75 a share dividend at the end of each of the next 2 years. At the end of year 3, it will pay a final liquidating dividend of $25 a share. After that, the company plans to close its doors permanently. What is the current value of this stock at a discount rate of 10 percent?

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Business

Darryl Pruitt

16 May, 01:56

Cayman Boats plans to pay a $1.75 a share dividend at the end of each of the next 2 years. At the end of year 3, it will pay a final liquidating dividend of $25 a share. After that, the company plans to close its doors permanently. What is the current value of this stock at a discount rate of 10 percent?

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Diana Becker · Answer 1

The current stock value is the most dependable indicator of a particular investment/security's present value. When it comes to bond, the current price is frequently quoted as 10% of par or face value.

The step by step diagram can be seen below:

Year Cash flow $ C, P, F Present value $

0 - 1.000 -

1 1.75 0.909 1.59

2 1.75 0.826 1.45

3 25.00 0.751 18.78

Current stock value $ 21.82