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March 25, 2017

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In the country of Ambiguostan, the government is providing salt-mine concessions to USalt & Co, but due to recent elections, will be revoking these concessions in 9 years. Since the salt business will be booming for years to come, USalt & Co is a highly traded stock and will continue its operations until the concessions expire. In that year, it will pay dividends of $13 million out of their profits and then shut down. Currently there are 450,000 shares of USalt & Co stock in the market. Ambigoustan\'s interest rate is 10% (you can assume it will not change). What would be the present value of a share of USalt & Co stock (rounded to the nearest dollar)?

  • econ - ,

    12.25

  • econ - ,

    13000000/450000 = 28.89
    28.89/(1.1)^9 = 12.25 = PV

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