Investor A is thinking about buying Company ABC today and selling it at the end of the fourth year immediately after receiving the 4th dividend. Assuming: After-taxes, Investor A present values the...

Investor A is thinking about buying Company ABC
today
and selling it at the end of the fourth year immediately after receiving the 4th dividend. Assuming:

• After-taxes, Investor A present values the Dividends paid by Company ABC at $230,000


• A expects to sell the company (Terminal Value) at EOY 4 for $1,500,000


• A pays tax of 20% on capital gains (the difference between the TV and the purchase price)


• Investor A uses an after-tax discount rate of 9%.

What is the highest price investor A would be willing to pay for Company AAA today?

Extracted text: ATV (1-td) (1-td) (1-td) (1-td) *div *div *div *div tcg*(TV-Purch Price) -Purch Price