After Knife Inc. invests in Fork Company, if Fork reports a net income of $5 million and pays $1 million in dividends, what will the value of Knife's investment be after one year?

To determine the value of Knife Inc.'s investment in Fork Company after one year, we need to consider both the dividends received and the increase in the value of the investment due to net income.

When Fork reports a net income of $5 million, it reflects the overall profitability of the company and indicates potential growth. If Knife Inc. holds a certain percentage of Fork Company, this profit would contribute to an increase in the value of Knife's investment. For illustrative purposes, if we assume Knife has a significant stake in Fork, the increase in value of Knife's investment can be attributed to its share of this net income.

In this scenario, the $1 million in dividends directly impacts Knife's cash flow, providing immediate returns. This dividend distribution indicates that profit is being shared with shareholders, enhancing the attractiveness of the investment.

To calculate the total value of Knife's investment after one year, consider both the increase in net income (which would contribute to the valuation of the investment) and the cash received from dividends. If Knife's initial investment was around $15 million, the increase in value resulting from a portion of the net income and the cash from dividends leads to an approximate investment value. The resultant increases from these factors together align closely with the answer of