Lakeside Sheet Metal Is Downsizing and Plans on Completely Closing

question 89

Multiple Choice

Lakeside Sheet Metal is downsizing and plans on completely closing three years from now. The firm's liquidation plan calls for annual dividends of $3, $6, and $36 over the next three years, respectively. What is the current value of this stock given a discount rate of 14 percent?

• A)$26.94
• B)$27.16
• C)$28.46
• D)$31.55
• E)$36.29

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Definitions:

Net Present Value

A calculation method used in finance to determine the value of a series of future cash flows in today's dollars, taking into account the time value of money.

Required Return

The minimum amount of profit an investor expects to achieve from an investment, considering its risk.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment or project.