Stan read an ad in the newspaper which said that the jackpot for picking the six winners in the dog race on the last night of th
e season was $825,000. Stan went that night and correctly picked the winners. However, it turned out that the newspaper had made a mistake. The jackpot was $25,000, not $825,000. Therefore the track owners refused to pay the latter amount. If this ad is treated like offers of reward, can Stan collect the $825,000?
1 answer:
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Answer:
P1=$8.43
Explanation:
The value of the stock is equal to the present value of all cash-flows expected from holding the stock. At the end of year 1, the value of the stock is found by calculating the present value of the remaining dividends i.e D2, D3, D4, D5 etc till infinity.
Therefore price equals
given the values of Dividends calculated above and ke= 15% :