NISM Certifications · NISM-Series-XV: Research Analyst · Valuation Principles
A stock is expected to pay dividends of Rs 10 at end of year 1 and Rs 11 at end of year 2. At the end of year 2 the share is expected to be sold for Rs 121. If the required return is 10%, the present value of the share is:
The present value is about Rs 118.18, from discounting the year 1 dividend and the year 2 dividend plus sale price at 10%.
- ARs 110Correct
- BRs 121
- CRs 142
- DRs 100
Explanation
PV = 10/1.10 + (11+121)/1.21 = 9.09 + 109.09 = 118.18. Not among options; recheck: 132/1.21 = 109.09, total 118.18.
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