$20 million/(1 + 0.15)1 = $17.4 million

$25 million in two years $25 million/(1 + 0.15)2 = $18.9 million

Total

$51.3 million

TABLE C1 Calculating Present Discounted Value of a Stock

Next, add up all the present values for the different time periods to get a final answer. The present value

calculations ask what the amount in the future is worth in the present, given the 15% interest rate. Notice that
534 C • Present Discounted Value

a different PDV calculation needs to be done separately for amounts received at different times. Then, divide

the PDV of total profits by the number of shares, 200 in this case: 51.3 million/200 = 0.2565 million. The price

per share should be about $256,500 per share.

Of course, in the real world expected profits are a best guess, not a hard piece of data. Deciding which interest

rate to apply for discounting to the present can be tricky. One needs to take into account both potential capital
{"moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "upload_timestamp": "2026-02-07T15:37:44.339247", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_type": ".pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "creator": "PDFMiner", "file_size_mb": 26.99, "file_name": "Microeconomics3e.pdf"}