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Oil and Gas stock prices are estimated to increase by 6% each year for the next 8years. The cost of one share is $225 in year 1. If the interest rate is equal with the gradient rate, how much is the value of one share by the end of the year 8

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hyderali230

Answer:

The value of one share by the end of year 8 is $358.62

Explanation:

We need to grow the price of the share for next 8 years in order to calculate the price of the share at the end of year 8.

Use following formula to calculate the price of one share after 8 years.

Price at the end of year 8 = Today's Price x ( 1 + Growth rate )^numbers of years

Price at the end of year 8 = $225 x ( 1 + 6% )^8

Price at the end of year 8 = $358.62

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