Show Numerically That Investment Horizon Has No Bearing on Current

question 45

Essay

Show numerically that investment horizon has no bearing on current stock price.For your illustration assume investment horizons of three versus five years and the following facts: the stock is correctly priced at $40.00, has a required return of 17 percent, a growth rate of 7 percent, and has just paid a $3.74 dividend.
Note: The variation between $40.01 and $39.98 is, of course, a rounding error.

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Definitions:

International Accounting Standards Board

An independent organization that establishes accounting standards known as International Financial Reporting Standards (IFRS) used globally.

Double Taxation

A taxation principle referring to income taxes paid twice on the same source of earned income, occurring typically with corporate dividends taxed at both the corporate and individual level.

Corporation

A legal entity that is separate and distinct from its owners, offering limited liability, ease of transferability of shares, and perpetual succession.

Partnership

A legal form of business operation between two or more individuals who share management and profits or losses.