Plan on investing payments

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Reference no: EM132017417

Fool’s Gold Mines (FGM) suspended its dividend today because of delays in obtaining permits for its overseas mines. Suppose you expect FGM to resume paying annual dividends in four years’ time, with a dividend of $0.80 per share, growing by 4% per annum forever. If FGM’s required return on equity is 10% p.a., its share price today will be closest to:

a) $6.00.

b) $8.00.

c) $10.00.

d) $13.30.

You have just settled a lawsuit in your favor and you will be receiving semi-annual payments of $25,000 over the next ten years. The first payment will occur six months from today. You plan on investing these payments and you expect to earn a return of 6% p.a. with the returns compounded monthly. The present value of this investment is closest to:

a) $329,520.

b) $368,004.

c) $370,642.

d) $371,937.

Reference no: EM132017417

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