Question: Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $ 5 0 0 . 0 0 $ 6 2 5 . 0 0

Year 1
Year 2
Year 3
Year 4
Year 5
Revenue
$500.00
$625.00
$750.00
$900.00
$1,035.00
Net Income
$20.00
$68.00
$144.00
$180.00
$212.40
Total Cash Flow
$(10.00)
$15.50
$59.00
$80.00
$98.90 Now assume that company will not be liquidated at the end of year 5, and the company's net income and cash flow grow by 10% from year 5 to year 6, and then remain flat thereafter until perpetuity. If investors now expect a yearly rate of return of 8% starting in year 6, and there are 100 shares of outstanding stock, what will the price per share of the company's stock at the end of year 5/beginning of year 6?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!