The present value of the inheritance

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Reference no: EM131868092

1. An inheritance offers the amount of $100 in one year but then grows that amount by a constant rate of 6% forever. Which of the following comes closest to the present value of the inheritance if the bond’s required rate of return is 10%?

a. $ 1,667

b. $ 1,429

c. $ 2,000

d. $ 2,500

e. $ 3,333

2. Limerick currently pays a dividend of $1.50 per share. Which comes closest to Limerick’s price per share if we assume that their dividend grows by 8% for two consecutive years, and then grows by 6% each year (starting in year 3) thereafter forever? Use a required rate of return of 10%.

a. $ 41.23 b. $ 54.49 c. $ 27.98 d. $ 33.28 e. $ 24.19

Reference no: EM131868092

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