Find what is the value of the stock today

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Question 1: Suppose you a lottery of $1000, 000 today. You have two scenarios to take your reward; the first scenario is to take the total amount as a lump sum. The second is to take your money in two in two installments; the first is $400,000 after one year and take $800,000 in two years. If the rate of return is 10% compounded annually. Which scenario would you prefer?

Question 2: Investors expect Thomas Corporation to begin paying dividends. The company should grow at a constant rate of 8 percent per year up to infinity. If the required rate of return is 12 percent, what is the value of the stock today? (Note that the last dividend paid equal $1.50).

Reference no: EM132543994

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