# Tutor profile: Rommel S.

## Questions

### Subject: Corporate Finance

A company has just paid a dividend of $2. Dividends are expected to grow at 3% per year. The equity discount rate for the company is 6%. What is the value of the company according to the Gordon Growth Model?

There are different ways to calculate the intrinsic value of a company. One is the Gordon Growth Model which is a discounted cash flow model based on projected future dividends that grow at a constant rate. The formula for the price of a stock using the Gordon Growth Model is: P = D / (r - g) , where P = current stock price D = value of next year's dividend r = equity discount rate g = growth rate of dividends Applying this to the problem, we get: P = $2 x (1 + 3%) / (6% - 3%) = $68.67 Thus, the value per company share is $68.67.

### Subject: Statistics

Two fair coins are tossed simultaneously. What is the probability of getting at least 1 head?

Probability is a number that indicates how likely an event is to occur. Probability ranges from 0 which indicates impossibility to 1 which indicates certainty. The formula for computing probability is: Probability = # of favorable outcomes / # of total possible outcomes Tossing a coin results to 2 possible outcomes: H (head) or T (tail). When 2 coins are tossed, the set of possible outcomes are: {HH, HT, TH, TT}. The total # of possible outcomes = 4. Getting at least 1 head is satisfied by the set {HH, HT} or 2 outcomes. Thus, the probability of getting at least 1 head = 2 / 4 = 0.5 or 50%.

### Subject: Finance

If you have $100 and you can earn interest of 2% annually, how much would you have in 3 years.

Answering this question requires an understanding of the time value of money. Money has the potential to grow in value by earning interest compounded over time. The question asks for the future value of money and has the following variables: PV (present value of money) = $100 r (interest rate) = 2% t (period of time in years) = 3 n (# of compounding periods per year) = 1 FV (future value of money) = ? (unknown) The formula for the future value of money (FV) is: FV = PV x $(1 + (r / n))^{t x n}$ = 100 x $(1 + (2%/1))^{3 x 1}$ = 100 x $(1 + 2%)^{3}$ = 106.12

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