A companys stock price is currently 25 per share What must t

A company\'s stock price is currently $25 per share. What must the stock price be in five years for an investor to earn 12% annual rate of return over the five year period? Assume the company does not pay any dividends over the five years. Please show your work.

Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=$25(1+12/100)^5

=$25*1.762341683

=$44.06(Approx).