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1
1.The total cost (in hundreds of dollars) to produce x units of a product is C(x) = 7x +4 a. 10 units b. x units c. Find the marginal average cost function.
2.To obtain the present price of stock Dn • The present price of a firm's stock should reflect the discounted value of the expected future cash flows to shareholders (dividends) D D P= D3 + + +...+ (1+k) (1+k) (1+k) (1+k)" P. present price of the stock D = dividends received per year k = discount rate n = life of firm in years
Expert Solution
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2.Present price of a stock can be computed using the following formula.
where D= dividend per year
r = discount rate
and n = no of years
Example: Find the present value of the stock for which dividend of $100 is paid for first 2 years ,$300 for 3rd year and $500 for the 4th year. Given discount rate is 10%.
Here D1 = D2 = 100 , D3 =300, D4 = 500 , r = 10% or 0.1 , n = 4
putting these values in the following formula
calculating this we get
PV = 90.9 + 82.64 + 225.39 + 341.51
PV = 740.44
Which is the present value of the stock
please see the attached file.
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