Description
A firm stock price is $25 per share and is expected to grow at a 5% compound annual rate. What should the stock price per share be in 5 years?
Explanation & Answer
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calculate the compounded figure after 5 years.
Principal equivalent is $25 and rate is 5% annually
The final value should be
A=P(1+ r/n) ^nt
P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n = number of times the interest is compounded per year
=25(1+0.05) ^1 X5=25 x (1.05)^5
=25 x 1.27628156
= 31.9070391
The value will be
$31.9070391