1. Assume a tall Starbucks coffee costs $1.85.

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?

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