Value consequences of a dividend change

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1. Assume a tall Starbucks coffee costs $1.85. If the interest rate is 6% per annum, compounded daily, and if the Starbucks price never changed, what would an endless, inheritable subscription to one Starbucks coffee per day be worth today?

2. In an efficient market, when should the stock price react to the value consequences of a dividend change? Discuss the effect both on the total return and on the capital gain. Which should be larger?

Reference no: EM132399276

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