Riverwood Company made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $3.52 a share. Secondly, the company announced that all future dividends will increase by 5.5% annually. What is the maximum amount you should pay to purchase a share of the company's stock if your goal is to earn a 15% rate of return

building b

Explanation:

Nash would buy the cheapest building

The present value of building 2 and 3 has to be determined

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Building b

cash flow each year from year 1 to 26 = $-71,870

I = 12%

PV = . 567461.08

Building c

Cash flow in year 0 =  $-650,400

cash flow each year from year 1 to 26 = $6,980

I = 12%

Pv = 595288.29

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

building b is the cheapest