Calculate the value of the share to the investor

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Problem 1: An investor is contemplating the purchase of ordinary shares at the beginning of this year and to hold the shares for one year. The investor expects the year-end dividend to be $2.00 and expects a year-end price for the share of $40. Calculate the value of the share to this investor if the required rate of return is 12%.

Problem 2: Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years. The salvage value of the ambulance will be $25,000. Assume the ambulance is sold at the end of year 5. Calculate the NPV of the ambulance if the cost of capital is 9%.

Reference no: EM132614951

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