The price of consolidated everything is now $75. The company pays no dividends. Ms. Bossard expects the price 3 years from now to be $100 per share. should Ms. Bossard buy Consolidated e. if she desires a 10% rate of return?explain

Answer 1

We'll be glad to check your figures on this problem.

Answer 2

i don't even know where to start on this problem

Answer 3

Take 10% of $75. Add it to $75. Is it more or less than $100?

Answer 4

its less, 82.50

Answer 5

So -- this must be a reasonable investment since he expects the price of the stock to be more than $82.50.

Answer 6

Ah, but remember, the expected $100 is 3 years hence. Is $75 compounded over 3 years at 10% greater than 100?