You are considering buying a share of stock in XYZ Corporation.At the end of years 1,2,and 3 the stock will pay you a dividend of $15.In addition,at the end of the third year you expect to sell the share of stock for $100.If the interest rate is 3%,how much is the share of XYZ stock worth to you today?
A)$123.14
B)$133.94
C)$137.96
D)$145.00

Question

Quizplus · Accepted Answer

To calculate the present value of the stock, we need to discount the future cash flows at the given interest rate of 3%.

PV = (15/1.03) + (15/1.03^2) + (115/1.03^3)
PV = $12.62 + $13.05 + $108.27
PV = $133.94

Therefore, the share of XYZ stock is worth $133.94 today. Option B is the correct answer.

You Are Considering Buying a Share of Stock in XYZ