To retain high-performing engineers, a large semiconductor company provides corporate stock as part of the compensation package. In one particular year, the company offered 1000 shares of either class A or class B stock. The class A stock was selling for $30 per share at the time, and stock market analysts predicted that it would increase at a rate of 6% per year for the next 5 years. The class B stock was selling for $20 per share, but its price was expected to increase by 12% per year. At an interest rate of 8% per year, which stock should the engineers select on the basis of present worth analysis and a 5-year planning horizon?

class A stocks

Explanation:

in 5 years, class A stock will be worth = $30 x (1 + 6%)⁵ = $40.15

in 5 years, class B stock will be worth = $20 x (1 + 12%)⁵ = $35.25

now we need to determine the present value if each stock:

class A stock present value = $40.15 / (1 + 8%)⁵ = $27.33

class B stock present value = $35.25 / (1 + 8%)⁵ = $23.99

since the present value of class A stock is higher, then the engineers should select that type of stocks.

it's actually a very difficult task, due to not many people can make 2 million dollars in 2 years. besides that, to the not-so-realistic ideas, you can create a business. it could be practically anything, but make it into a business that isn't that known yet, you get me? also, lets not forget about stock market. that's where all the good stuff happens. use investments at the beginning and begin to raise up your business or whatever you're going to do. as this is a very non-realistic idea, it's still worth the shot!

answer; sprint;