Fin 419 final exam 2017/fin 419 final exam 2017

In this example, we need to calculate the total amount of expected cash flow from dividends and the sale price at the end of five years – which amounts to $60 ($6 x 5 years + $30). Following this, we need to determine an appropriate discount rate given your desired return (10%). Given that you have stated a desire for a 10% return, we can assume a hurdle rate or discount rate of 10%.

Using these values, we can determine a fair purchase price for the stock today using Present Value calculation as follows:

Present Value = ($60 / (1+r)^n) where r=discount rate (10%) and n=number of periods (5years)

=$60/(1+0.1)^5

=$37.88

Therefore, based on our calculation above, a fair purchase price for this stock today would be $37.88 if you want to earn 10% on your investment over five years. It is important to note that while calculating Present Value may provide us with an estimate of how much one should pay today in order to receive certain returns in future; it is essential that any investor must also consider other factors such as volatility and liquidity risk before investing in any particular asset class or security.