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29 Sep 2019
Suppose that a friend has started a business selling software. The software is a great hit, and the firm quickly grows large enough to be able to sell the stock. Your friend's firm promises to pay a dividend of $5 per share every year for the next 50 years, at which point your friend intends to shut down the business. The firm's stock is currently selling for $75 per share. If you believe that the company really will pay dividends as stated and if you require a 10% rate of return to make this investment, should you buy the shock? Briefly explain and show your work.
Suppose that a friend has started a business selling software. The software is a great hit, and the firm quickly grows large enough to be able to sell the stock. Your friend's firm promises to pay a dividend of $5 per share every year for the next 50 years, at which point your friend intends to shut down the business. The firm's stock is currently selling for $75 per share. If you believe that the company really will pay dividends as stated and if you require a 10% rate of return to make this investment, should you buy the shock? Briefly explain and show your work.
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Chika IlonahLv10
29 Sep 2019