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A stock has a required return of $8.4 \%$ and is expected to sell for $\$ 162.3$ in 10 years. It does not currently pay a dividend. What is the stock's value today?
Answer:
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Answer
\(\boxed{72.45}\) is the value of the stock today.
Step 1 ：Given that the future value (FV) of the stock is $162.3, the required return (r) is 8.4% or 0.084 in decimal form, and the number of periods (n) is 10 years.
Step 2 ：We can calculate the present value (PV) of the stock using the formula for the present value of a future sum: \(PV = \frac{FV}{(1 + r)^n}\)
Step 3 ：Substituting the given values into the formula, we get: \(PV = \frac{162.3}{(1 + 0.084)^{10}}\)
Step 4 ：Calculating the above expression, we find that the present value of the stock is approximately $72.45.
Step 5 ：\(\boxed{72.45}\) is the value of the stock today.
